The Global Internet Economy

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The Global Internet Economy
Presentation to the 8th World Congress on the
Management of eBusiness
Richard Simpson Director General Electronic
Commerce Branch July 13, 2007
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ICTs, the Internet and the Global Internet
Economy
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ICTs A General Purpose Technology

• General purpose technologies (GPTs) are key
  technologies which have economy-wide application
  and drive profound economy-wide transformation,
  over a long period of time
• Electricity is also a GPT
• ICTs are today where Electricity was in 1920, and
  the transformation still has a long way to go
• With such large and continuing efficiency gains,
  ICTs have a much greater potential to spur
  economic growth than electricity

Source Lipsey, Carlaw Bekar, Economic
Transformations General Purpose Technologies and
Long Term Economic Growth, Oxford University
Press, 2005
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GPTs Fundamental For Transformation

• Induce major changes to societys economic and
  social structure
• The organization of work, management of firms
• Skill requirements
• Location and concentration of industry
• Supporting infrastructure
• ICTs and the platforms they operate on are the
  fundamental technologies for todays economy

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Internet use is still going up
Number of Internet users, 2005
Subscribers per 100 population
Source ITU, OECD Key ICT Indicators, 2005
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Broadband continues to grow
Broadband subscribers per 100 inhabitants, 2006
Source OECD, Broadband Statistics Dec. 2006,
April 2007
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Online commerce is exploding - internationally
Worldwide e-Commerce Sales Forecast

• Worldwide e-commerce spending projected to grow
  at CAGR of 23, exceeding 8.75 trillion in 2009
• The growth of B2B spending is comparably strong
  at CAGR of 22, amounting to 7.6 trillion by 2009

In billions of
Source IDC, Worldwide Internet Usage and
Commerce 2005-2009 Forecast update, April 2007
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And domestically
Value of Canadas Total Internet Sales 2000-2006
(Billions)

• Internet sales in Canada continued to grow in
  2006 to 49.9 billion, up 40 from 2005
  (Statistics Canada, April 20, 2007)
• Canadian online advertising revenues totalled
  1.01 billion in 2006, up 80 from 562 million
  in 2005 (Interactive Advertising Bureau of Canada
  (IAB), April 2007)

Source Survey of Electronic Commerce and
Technology 2006, The Daily, April 20 2007,
Statistics Canada
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Allowing supply chains to go global

• Permits globalization of investment
• - Trade liberalization, mergers and
  acquisitions, emerging markets, offshoring,
  border security, outsourcing
• Promotes firm efficiency and productivity
• - Channel coordination and integration through
  new technology
• Increases value
• - Reductions in cycle time, more reliable
  on-time deliveries, wider variety of products
  and packages

ICTs and telecom networks are the foundation of
the modern global supply chain
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Creating new markets and businesses

• The mainstreaming of electronic commerce has
  created an e-economy in which the Internet and
  supporting ICTs are the central infrastructure
• E-business applications have become the primary
  tool for the transformation of business processes
  and marketplace innovation
• Digital products and services
• E-logistics and supply chains
• E-payments and online banking
• Online shopping
• Online procurement

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The importance of e-business

• Business Success
• Reduced costs
• Increased transaction speed and reliability
• Better managed customer relations
• Improved management capabilities
• Developed or improved collaborative capabilities
• Access to global markets

• Sector Competitiveness
• Increased efficiency of supply-chains, e-logistics

• Greater Consumer Welfare
• Choice
• Competition

• Increased Productivity
• Better standard of living

Source OECD, Restructuring value chains
Impact of the Internet, EBIP, WPIE 2002
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And Canadian firms are seeing the benefits
Private sector only
of enterprises that use the Internet
Source Statistics Canada, Survey of Electronic
Commerce and Technology, April 2007
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Policy Challenges
1. Threats to the online marketplace 2. Weak
adoption 3. Measurement
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Internet Threats Remain a Challenge
Malicious Activity by Country per Internet User

• 90 of spam is relayed from zombie computers
• A network of zombie computers is capable of
  sending hundreds of millions of spam messages in
  a couple of hours

Source Symantec Corporation - Symantec Internet
Security Threat Report, Trends for July-December
06
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What are these threats?

• Individuals
• Criminal misuse of personal, online banking and
  other financial information to steal money
• Luring individuals to counterfeit websites via
  spam e-mail (phishing)
• Deceptive marketplace behaviour, using false or
  misleading product claims in the online
  marketplace
• Businesses
• Electronic theft of corporate information
  holdings and transaction records
• Counterfeiting of web addresses to defraud
  individuals and businesses
• Network Providers
• High volumes of spam that can equate to 75 of
  all e-mail traffic clog and slow networks.
  Providers forced to spend millions to prevent
  spam from entering their networks
• Networks are threatened by viruses, worms,
  botnets, and other malicious based software
  (Malware) which can lead to attacks that threaten
  the reliability and stability of the Internet,
  electronic commerce and online banking

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Lack of trust and confidence is undermining the
internet economy

• Privacy fears discourage electronic commerce in
  Canada
• Canadians more concerned about security and
  privacy than U.S.
• 40 Canadians avoid online shopping compared to
  24 of Americans. (Canadian Alliance Against
  Software Theft (CAAST) - November 2005)
• Users change their online behaviour due to
  security concerns
• Majority (91) of U.S. Internet users have
  altered online behaviour. (Pew Internet and
  American Life Project June 2005)
• Number of U.S. phishing attempts grew 28 in 2005
  and will inhibit three-year U.S. e-commerce
  growth rates by 1 to 3. (Gartner, June 2005)
• Consumers lose trust in online banking
• 74 of online Canadian online have concerns about
  e-mail fraud which affect their online financial
  behaviour. (Forrester April 2005)
• 80 of consumers in the U.S, Canada, Germany and
  the U.K concerned about someone stealing their
  online identity to access online bank accounts.
  (2004 Entrust Internet Security Survey).

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Weaknesses in Canadas performance as an internet
economy

• Canadian businesses are not using connectivity
  effectively to enhance competitiveness
• Despite proven benefits of using electronic
  commerce and other Internet business solutions,
  Canadian SMEs and key sectors of the economy have
  lagged in adoption
• Survey of Electronic Commerce Technology (SECT)
  2006
• 61 of online sales comes from only four sectors
  of the economy
• 1 barrier to Canadian business adopting
  e-commerce is Goods and services do not lend
  themselves to Internet transactions
• Canadian online sales exports have been declining
  since 2002

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Canadian firms are slow to adopt
Online Business Activities in Canada 2000-2006
Source Statistics Canada, Survey of Electronic
Commerce and Technology, April 2007
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Particularly in new technologies
Source Statistics Canada, The Daily, April 20,
2007
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Measurement is a key element

• Survey of Electronic Commerce and Technology
  (SECT)
• Capabilities
• Analysis of SECT microdata
• Allows researchers to follow individual firms and
  their technological development through time
• Potential to be linked to other datasets that
  exist within Statistics Canada
• Content
• To date, there are three versions of the
  database 2001-2003, 2002-2004, 2003-2005
• Each version contains between 4500 and 5000 firms
• All of the categorical variables that are
  included on the survey throughout the three-year
  period are included on the database
• Access
• Potential researchers are encouraged to put
  forward proposals to the Science, Innovation and
  Electronic Information Division for the use of
  the database
• Mark Uhrbach [phone] or Bryan van Tol
  [phone]

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Policy Response
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Creating the right environment

• Ensure clear and consistent ground rules for the
  online environment to
• Promote consumer trust and business confidence
• Network Protection
• Develop best practices to protect the global
  network
• Standards
• Keep them open and interoperable
• Coordinate laws, policies and regulation across
  borders

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Protecting the online marketplace Network
threats

• Threats to the Internet and online commerce
  require a concerted, cooperative approach with
  combined public and private sector efforts
• Governments
• Responsible for the legal framework, providing
  strong laws with meaningful penalties to address
  threats, and for effective enforcement.
• Industry
• Voluntary standards, guidelines and best
  practices.
• Systematic blocking of spam messaging ISP
  filters, better network management, corporate
  firewalls.
• Joint
• Increased consumer awareness and education.
• Improved international cooperation and
  coordination.

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Protecting the online marketplacePersonal
privacy

• Strengthen laws for the protection of personal
  information and privacy as part of the statutory
  review of PIPEDA.
• Currently considering the Report of the
  Parliamentary Committee (ETHI) and its
  recommendations concerning the definitions of
  lawful authority and mandatory security breach
  notification
• Other areas of work
• Enhanced related authentication requirements for
  accessing/disclosing personal information
• Measures to counter deceptive or fraudulent
  acquisition of personal information
  (pre-texting)
• Measures to address harmful/fraudulent
  information-handling practices.

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Encouraging new technologies

• RFID
• Continued dialogue through the GS1 Canada Public
  Policy Forum
• International standards work on business
  standards for information exchange for cross
  border supply chains
• Privacy commissioners becoming engaged
• Factual RFID information for consumers
• Assessing the role of the public sector as well
  as the economic impact through the OECD

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Promoting the growth of global markets

• As an engine of socio-economic growth, ICTs
  represent an opportunity for emerging markets to
  promote development, wealth creation and
  international trade
• Canada at the forefront in terms of bridging the
  digital divide internationally
• Chaired the G8 DOT Force in preparation for the
  Kananaskis Summit, 2002
• Played a leading role in the UN ICT Task Force
  (2003-2005)
• Played key part in creation of Commonweath
  Connects, launched following the Commonwealth
  Heads of Government Meeting in 2005
• Formed international partnership on ICT
  indicators (WSIS 2005)
• Supporting Canadian participation in the 2006
  Sommet de la Francophonie

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International cooperation essential

• Global harmonization of Internet laws, policies,
  standards, regulations, and business practices
• Common guidelines to protect the privacy of
  personal information across borders
• Cooperation to address global cyber-threats such
  as spam
• Alignment of rules and standards for the conduct
  of e-business trans-nationally, e.g. recognition
  of electronic signatures and contracts,
  authentication
• Cross-national cooperation essential among
  government, industry and consumers
• The Messaging Anti-Abuse Working Group (MAAWG), a
  private sector body, leads coordination of
  anti-spam efforts of Internet Service Providers
  (ISPs), technology providers and bulk email
  senders, from around the world

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The 2008 OECD Ministerial Conference

• The OECD will hold a Ministerial-level Conference
  on the Future of the Internet Economy in June
  2008 in Seoul, Korea
• Objectives
• Engage in a future-oriented discussion about how
  to strengthen the Internet as a source for
  economic and social value.
• Demonstrate that the Internet is critical
  economic and social infrastructure
• Strengthen policies for the Internet Economy

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2008 OECD Ministerial Conference

• The 2008 Ministerial will mark the 10 year
  anniversary of the milestone Ministerial
  Conference held in Ottawa in 1998
• Since 1998, the environment and agenda for the
  information society has changed dramatically,
  generating new international issues
• Net neutrality rules for competition and market
  access in the delivery of advanced Internet
  services
• Regulatory reform and modernization i.e. impacts
  of VOIP, mobile Internet
• Threats to the Internet spam, spyware and
  cybercrime and the need for trans-border
  solutions
• Digital Content the need for legal and policy
  ground rules
• Identity Management better system to facilitate
  the conduct of online transactions (i.e.
  authentication)

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Electronic Commerce Branch
www.e-com.ic.gc.ca

• Policy Development and Implementation
• Research and Statistics
• International Development
• Strategies for e-Business Adoption and Diffusion