Overcoming Digital Divide in Emerging Economies

Overcoming Digital Divide in Emerging Economies

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Description: The Chinese government had invested accumulatively 87 billion RMB in the decade during 2004-2013, which has activated phone lines for about 204,000 villages, opened the broadband for 111,000 villages, respectively accounting for 95.6%, 91% of all villages in China.

 
Author: Ben Shenglin, Felice Simonelli, Zhang Ruidong, Romain Bosc, Li Wenwei  | Visits: 338 | Page Views: 537
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Contents:
Digital Infrastructure:
Overcoming Digital Divide in Emerging
Economies
POLICY AREA: Digital Economy
2017-May-31

Ben Shenglin (Zhejiang University, Academy of Internet Finance)
Felice Simonelli (Center for European Policy Studies)
Zhang Ruidong (Zhejiang University, Academy of Internet Finance)
Romain Bosc (Center for European Policy Studies)
Li Wenwei (Zhejiang University, Academy of Internet Finance)
Supported by: Emerging Market Sustainability Dialogues

Outline
Introduction: What’s Digital Divide
• What’s digital divide?
• What’re the “full benefits” of overcoming digital divide?
Part 1: Digital Infrastructure in China
Part 2: Digital Infrastructure in EU
Part 3: Our Proposal
Part 4: Policy Recommendations
• A life-cycle theory on overcoming digital divide comprehensively
• Staged efforts in overcoming digital divide

Introduction: What’s Digital Divide

What’s digital divide?
• It refers to the gap in usage and access to digital infrastructure and services
between individuals, households, businesses or geographical areas.
• It affects certain population segments, for instance, low-income and rural
communities, due to the lack of digital infrastructure, affordability, knowledge and
skills.
Lack of affordable
network services,
devices and
applications

Lack of Digital
Infrastructure &
Services

Lack of digital
knowledge &
skills to create or
add value

Digital
Divide

Lack of
coordinated
efforts to foster
social and
economic
equality

“Full benefits” of ICT and internet connectivity
The ultimate goal of closing the digital divide is to inclusively provide every member of a
society with an equal opportunity to benefit from digital development. The digital
development brings following benefits:

Efficiency

Social & Economic
Inclusion

New Economy

Business

Capital utilization

Trade

Competition

People

Labor productivity

Job Opportunities

Consumer welfare

Governments

Public sector
capability

Participation

Voice

Source: World Bank (2016 )

Part 1: Digital Infrastructure in China

Helping China’s rural poor: government’s efforts

(source)

(source)

Increasing Internet Penetration in China
# of Internet Population & Internet Penetration Rate
Unit: 1 ∗ 104

Internet
Population
Source: CNNIC Survey (2016)

Internet
Penetration Rate

2012-2016 China’s Mobile Payment Market (in billion $)

(source)

Digital Divide Remains Significant
% of Internet Population from urban and rural areas

Urban

Source: CNNIC Survey (2016)

Rural

Declining Capital Expenditure in Telecom Equipment
Revenue (billion RMB) and % of Capex of Chinese Telecom Companies

Revenue (billion RMB)

Source: Wind

Capex (%)

Major Policy Milestones in China
“Gold Village” Project

Internet+

“Villages Connected” Project

Fiber-to-the-home

2012.11

2012.5

2012.12.5

2013.8.17

2004.1.16

1994.12

2015.1.30 2015.8.31

2016.3.23

Big data initiatives
Broadband China

Smart City

Cloud Computing

Village E-commerce initiatives

“Villages Connected” Project in China
• Extending Radio and TV Broadcasting
Coverage to Every Village: a national project
that emphasized making available paved roads,
electricity, living and drinking water,
telephone networks, cable networks, the
Internet and so on in Chinese villages

• Progress: Chinese government had invested
accumulatively 87 billion RMB in the decade
during 2004-2013, which has activated phone
lines for about 204,000 villages, opened the
broadband for 111,000 villages, respectively
accounting for 95.6%, 91% of all villages in
China.

Part 2: Digital Infrastructure in EU

The Digital Infrastructure in the EU
 Digital infrastructure: broadband connectivity, human capital (skills) and digital tech integration
and usage for individuals, businesses and public administrations
Digital Economy and Society Index (DESI):
1 Connectivity

Fixed Broadband, Mobile Broadband, Broadband speed and Affordability

2 Human Capital

Basic Skills and Usage, Advanced skills and Development

3 Use of Internet

Content, Communication and Online Transactions

4 Integration of Digital Technology

Business digitisation and eCommerce

5 Digital Public Services

eGovernment

80
70

1 Connectivity

2 Human Capital

60
50
40

30
20
10
0
Source: European Commission, Digital Scoreboard

3 Use of Internet

4 Integration of Digital Technology

5 Digital Public Services

The Digital Infrastructure in the EU
Broadband infrastructure:
Connectivity Indicators (DESI 2016)

Coverage EU28

Take-up EU28

97%

72%

% households

Figures from June 2015

% households

Fixed Broadband
Fixed Fast Broadband (NGA)

71%

30%

% households

% of subscriptions >= 30Mbps, out of
fixed BB subscriptions

86%

75%

% households (4G LTE)

Subscribers per 100 people (all tech)

Mobile Broadband

• NGA networks are still limited to
urban areas: only 28 % of rural
homes are covered, mainly by
VDSL
• Mobile 4G LTE deployment has
also focused mainly on urban
areas, as only 36 % of rural homes
are covered

NGA networks coverage, 2015
Total

100%

Rural

80%
60%
40%
20%
0%
EL

IT

FR HR PL SK EU RO BG CZ

FI

SE

ES HU SI NO IE
Source: IHS and VVA

DE CY EE AT UK LV

IS

PT DK LU LT NL BE MT

The Digital Infrastructure in the EU
Human capital
Human Capital main dimensions

EU 28

Internet Users

• 38% of EU workplaces lack of digital
skilled employees, leading to loss of
productivity (46%) and loss of customers
(43%)

75% weekly - 65% daily

% individuals (aged 16-74)

2014

Never used Internet

18%

% individuals

2014

ICT Specialists

2.8%

% employed individuals

2012

STEM Graduates

• 88% of the EU workplaces did not take
any action to tackle the lack of digital skills of
their employees.

17/1000

Graduates in STEM per 1000 individuals (aged 20 to 29)

2012

DESI Component on Human Capital by aggregate scores, 2015
Basic skills and usage

Advanced skills and development

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
FI

SE

DK UK

NL

LU

IE

BE

DE

EE

FR

AT

CZ EU 28 SK

SI

ES

LT

MT HU

Source: European Commission, Digital Agenda Scoreboard

LV

PL

PT

HR

IT

CY

EL

BG RO

The Digital Infrastructure in the EU
North-South & Western-Eastern divide in BB penetration (left) and Internet usage (right)
Households with broadband connections by NUTS2 Regions 2015 (%)

Proportion of people who never used Internet by NUTS2 Regions, 2015 (%)

The Digital Infrastructure in the EU
2. Challenges ahead and EU policy instruments to bridge the digital gaps
Telecommunication services revenues per region, bn EUR,
2012-2016

Fixed and Mobile CAPEX in domestic markets, mn EUR,
2009-2014

300

250

252

258

231
237

226

200

235

240

220

216

213
179

166

154
150

133

139

2012

2013

100

50

0
EU26

2014
CHINA

2015

Forecast 2016
US

Source: European Commission, Digital Progress Report 2016

Source: IDATE

 Under-investment in Europe risks hampering the deployment of nextgeneration digital networks

The Digital Infrastructure in the EU
EU response to close the digital divide

Regulatory impulse - the Digital Single Market after two years: Success or Failure?
 Better access for consumers and businesses to online goods and services across Europe
 Creating the right conditions for digital networks and services to flourish
 Maximising the growth potential of our European Digital Economy

 EU instruments supporting ICT development, including broadband infrastructure
 Cohesion funds
o The European Regional Development Fund and the European Agricultural Fund for
Rural development: EUR 21 billion over 2014-2020 to ICT development
 The Connecting Europe Facility (CEF) and European Fund for Strategic Investment
(EFSI):
o CEF: around EUR 1 billion on telecoms
o EFSI Infrastructure and Innovation Window: EUR 30 billion (so far in 2016) in 7
sectors, including ICT and human capital
 The New Skills Agenda for Europe, along with the Digital Skills and Jobs Coalition
launched in December 2016

Part 3: Our Proposal

1. Connect the unconnected

encouraging open access
to the incumbent’s
network,
requiring all major
infrastructure programs
to include provision for an
optical fiber link,
setting up internet
exchange points and
creating local caches for
used content.

involves spectrum
management, which
requires increasing the
amount of spectrum
available,
ensuring competitive
access,
encouraging sharing of
essential facilities, such as
radio masts, and
liberalizing the market for
spectrum resale.

Last Mile

eliminating monopoly
status over the
international gateway and
cable landing stations

liberalizing the market for
building and operating
backbone networks,

Invisible Mile

liberalizing the market for
satellite dishes and

Middle Mile

First Mile

Supply-side ICT policies: the internet enters a country (the first mile), passes through
that country (the middle mile) to reach the end user (the last mile), and certain hidden
elements in between (the invisible mile).
Government policies
permitting competing
facilities, especially for
intermodal competition
and mandating the
incumbent to make local
access lines available to
competitors at wholesale
prices (local loop
unbundling).

2. Industry innovations
Digital investments need the support of several factors:

improved
social digital
skills
adequate
market rules

Digital
technologies

Digital
investments
need

accountable
institutions

• China top Internet companies are bringing e-Commerce to Villages – see next slides
• An Indian example

Rural e-commerce: Village-based e-Commerce - Taobao Villages in China
• Since 2009, the number of “Taobao Villages”
has been on the rise in China, and these villages
have become a significant force behind the
development of rural e-commerce in China.
• In 2016, the number of Taobao villages in China
reached 1311, with Taobao towns reaching 135.
As an important way of closing the digital divide
between urban and rural areas in China, government
should:
• Provide digital infrastructure at an affordable price.
• Provide digital knowledge and skill training to the
villagers.
• Provide finance support.

Industry innovation is essential Mobile Apps for India Under-supported people



In a middle city called Indore, the way of doing business by “husband and wife” stores are
changing dramatically
• They can use smartphones to order over 1000 goods and they will be delivered the
next day
• Before, it is resellers visits theses small stores once a week
• “ShopKirana” is the mobile App used to make this happen – the goal is to make it to be
used by 9 million “husband and wife” stores so they can compete with those big and
foreign capital supported chain stores.



This example is about
• Mobile infrastructure
• Smartphone
• Mobile Apps

(Source: Japan Economic News, 05/22/2017)

3. Education should be dynamic and stay ahead
• Workers must acquire new skills that help them become more productive thanks to
this technology.

4. Technology cannot replace human beings in making decisions
• General knowledge and digital knowledge are equally important for closing digital
divide. Although artificial intelligence (AI) is automating an increasing number of tasks,
general skills revolving around human care and creativity for improved decision-making
and ethical judgments are crucial to ensure a broader socio-economic inclusion.

5. Coordinated efforts
• Coordinated efforts at global level and at national level are needed in developing
policies, standards and regulations to ensure a high degree of competition.
• China’s practice is on the next slide

The Government-led Coordinated Efforts: Five-Year Rotational Plans in China



The Eleventh Five
-Year Plan
2006-2010






View information as a resource
Improving the digital infrastructure
Enhancing the information security
Computerizing manufacturing




Building the next generation
of digital infrastructure
Moving into an information society
Enhancing network security and
information security

The Thirteenth
Five -Year Plan

2016-2020


The Twelfth Five Year Plan

2011-2015




Building
advanced
and
efficient information network
Developing internet based
industries
Implementing national big
data strategy

Recent Government Efforts: Precise Assistance of Poverty (PAP)



A grand goal is to eliminate poverty by 2020
• Promise a reduction of 10 million of people in poverty every year starting from 2016
• Official poverty line is 2300RMB in China
• Under poverty line: in 1995 - 555 million; in 2015 – 56 million
• In 2016, 12 million people is out of the poverty line



It is considered the last stage of eliminating poverty - a critical stage where more and precise efforts are needed



Poverty Subsidy System effectiveness needs to be improved
• In 2010, over 80% of people under poverty line were not subsidized or assisted
• Poverty assistance standard is not crispy clear
Precise Assistance of Poverty
• Use the latest ICT such as blockchain technology

(source: Austrilia EastAsia Forum, 05/26/17)

Recent Government Efforts: Precise Assistance of Poverty (PAP)


Single-goal poverty assistance may not be enough
• Long term assistance is needed
• Other aspects need to be considered: health assistance
• Skills training needed



Move Poverty out of mountains
• Move remote/poor living/not suitable to live villages out of mountains with strong government subsidies

(source: Austrilia EastAsia Forum, 05/26/17)

Part 4: Policy Recommendations

At the G20 level, general principles should be set for emerging economies:


Ensuring physical access to digital infrastructure is
necessary but not sufficient; other complementary actions
must be taken to support digital literacy.



The focus should shift, both in resource allocation and
policy agenda-setting, from “providing infrastructure and
access” to “encouraging the usage of the existing
infrastructure to create value” and also from “hardware”
to “human-ware”.



Digital responsibility should also be advocated; in other
words, the Internet and ICTs should be used in a way to
improve human life, economic prosperity, equality and
inclusiveness.



A life-cycle theory is provided on the next slide to shed
lights on overcoming digital divide comprehensively

A life-cycle theory on overcoming digital divide comprehensively
Evaluation

Valueadding
Digital
Knowledge

Infrastructure
building

Coordinated
Efforts

Affordability
development

Skills
building/training

At the national level, governments should elaborate policy guidelines and take
the following actions to reduce socio-economic disparities.


Governments should promote digital innovation and
entrepreneurship, which in turn would create new
markets, provide new employment opportunities and
eventually improve living conditions.



Governments should foster coordinated efforts, especially
at the industry level, to create affordable technologies
able to overcome the digital divide.



Governments should adapt the education system to the
changing labour market and support digital knowledge
and skill training for everyone at an affordable price.



The next few slides show China’s Government’s Staged
efforts in overcoming digital divide

China’s Government’s Staged efforts in overcoming digital divide

1) Villages Satellite Covered: Bring Broadcast TC signals to
villages via satellites
2) Villages Road Connected: Build paved roads to villages;
the slogan: build roads first if you want to become rich
3) Villages Broadband Connected: bring Internet or FTTH to
villages

4) Villages Mobile network Covered: most Chinese villages
now have 3G or 4G network coverages

Stage 1
Stage 2

Stage 3
Stage 4

Recent China’s Local Government Experimentation


Big Data Provincial Development Experimentation in Guizhou
• In GDP, Guizhou was ranked one of the last 3 provinces in China
• Is considered a remote and poor province in China
• Many people under poverty line



But rising quickly since 2015 with a strong ambition of big data driven economic lift
initiatives
Guizhou is aiming to become the Center of big data industry innovations and
entrepreneurships
• The Internet-based sales growth rate in Guizhou province is becoming #1 in China



IDC estimate, In 2017, globally, Big Data contribution to GDP
• 151Billon USD, 12.4% growth over 2016
• USA $78.8B
• West Europe $34.1B



China’s goal is to make Big Data industry contribute to GDP 1000000 million RMB or 143B USD
by year 2020

(Source: Japan Economic News, 05/27/2017)

Thank You!