EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 4.8.2009 
SEC(2009) 1103 final 
COMMISSION STAFF WORKING DOCUMENT 
 
Accompanying document to the  
 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Europe's Digital Competitiveness Report  
 
Volume 1: i2010 — Annual Info rmation Society Report 2009 
Benchmarking i2010: Trends and main achievements  
 
{COM(2009) 390 final} 
{SEC(2009) 1060} 
{SEC(2009) 1104} 
 
ELECTRONIC VERSION ONLY  
 
EN 2   EN Executive Summary .............................................................................................................. ..... 5 
1. The Broadband Economy.......................................................................................... 8 
1.1. Penetration of fixed broadband acce ss between 2003 and 2009: Reducing the 
broadband gap .............................................................................................................. 8 
1.2. Broadband coverage: Towards broadband for all ...................................................... 10 1.3. Increased competition brings higher speeds at lower prices...................................... 12 1.4. Indexing Broadband Performance in 2009 ................................................................ 14 1.5. Conclusions............................................................................................................... . 16 
2. Regular Internet usage and the eInclusi on puzzle: Tackling digital divides...... 21  
2.1. Regular internet use in the EU and its Member States............................................... 21 
2.2. Disparities in regular internet use acro ss socio-economic groups and the Riga goals
............................................................................................................................... ..... 22 
2.3. Barriers to household take up of the internet ............................................................. 25 2.4. Barriers to broadband take-up.................................................................................... 27 2.5. Results of econometric studies................................................................................... 28 2.6. Disparities in Digital Literacy.................................................................................... 30 2.7. The emerging Second Digital Divide......................................................................... 32 
2.8. Conclusions............................................................................................................... . 33 
3. The impact of ICT on Social Capital...................................................................... 35  
3.1. ICT and social capital................................................................................................. 35 
3.2. A typology of internet use.......................................................................................... 37 3.3. Perceptions about the so cial impact of ICTs.............................................................. 39 
3.4. Conclusions............................................................................................................... . 42 
4. The Internet as a Communication tool................................................................... 43  
4.1. How do Europeans use the internet to communicate? ............................................... 44 
4.2. Does the Internet replace ot her means of communications?...................................... 46 
4.3. Youngsters are the most in tensive internet users ....................................................... 49 
4.4. The mobile phone for advanced communica tion services: An emerging service...... 51 
4.5. Conclusions............................................................................................................... . 54 
5. The use of the Internet for entertainm ent purposes and its impact on content 
markets...................................................................................................................... 56  
5.1. Willingness to pay for content ................................................................................... 57 
 
EN 3   EN 5.2. New content and new platforms for exchange: User Created Content ...................... 59 
5.3. The use of the internet for entertainment purposes and to replace other means of 
communications: a challenge fo r the content industry............................................... 60 
5.3.1. Online music ............................................................................................................ .. 62 
5.3.2. Online video............................................................................................................ ... 64 
5.3.3. Videogames.............................................................................................................. .. 66 
5.4. Conclusions............................................................................................................... . 67 
6. ICT uptake by European businesses and productivity impacts .......................... 70  
6.1. Developments in ICT uptake by EU businesses ........................................................ 70 
6.2. Supply chain management ......................................................................................... 72 6.3. The economic impact of ICT: theory and evidence................................................... 75 6.3.1. The impact of ICT on productivity and growth ......................................................... 75 6.3.2. The impact of ICT on employment............................................................................ 76 6.4. Conclusions............................................................................................................... . 77 
7. Developments in National ICT policies.................................................................. 78  
7.1. Overview of main ICT policy priorities and developments across Member States... 78 
7.2. Specific ICT policies.................................................................................................. 81 
7.2.1. Infrastructure deployment: fixed and mobile broadband diffusion............................ 81 
7.2.2. Encouraging the use of ICT/broadband, eInclusion and digital literacy.................... 83 7.2.3. Online public services................................................................................................ 84  
7.2.4. Other policies .......................................................................................................... ... 87 
7.3. Conclusions............................................................................................................... . 87 
8. The impact of the economic downturn on the ICT sector.................................... 89  
8.1. The impact of the crisis on the ICT sector ................................................................. 89 
8.1.1. Consumer goods and services .................................................................................... 90 8.1.2. The internet segment.................................................................................................. 91  
8.1.3. The ICT manufacturing sector ................................................................................... 94 8.1.4. Semiconductors.......................................................................................................... 94 
8.2. Conclusions............................................................................................................... . 95 
9. R&D in ICT and the world economic crisis........................................................... 98  
9.1. Country-level analysis................................................................................................ 98 
 
EN 4   EN 9.2. ICT R&D investment trends by sectors ................................................................... 101 
9.2.1. Methodology ............................................................................................................ 1 01 
9.2.2. Telecom Equipment Industry................................................................................... 103 9.2.3. Telecom operators.................................................................................................... 106  
9.2.4. Semiconductors Industry.......................................................................................... 107 9.2.5. Software ................................................................................................................ ... 109 
9.2.6. Internet companies ................................................................................................... 110  
9.3. Conclusions.............................................................................................................. 1 11 
 
EN 5   EN EXECUTIVE  SUMMARY 
The i2010 initiative is successfully meeting its  challenges and delivering on its promises.  
Take up of ICT by European enterprises and citi zens has risen substantia lly over the past few 
years and the rapid spread of broadband is s timulating a more intensive use of advanced 
internet services. The quality of access has im proved and has become cheaper, while use has 
intensified, in particular through the advancement of user-created content and social networks. 
More and more people are going online, incl uding those belonging to more disadvantaged 
social groups. Use is becomi ng more interactive and sophist icated and the internet has 
become a popular tool for commu nication and entertainment serv ices. This report analyses 
developments in Europe's information societ y and benchmarks Member States' progress in 
implementing the i2010 initiative. It  also looks at developments in  the ICT sector in the face 
of the economic crisis, with a focus on the impact it is having on R&D investment.  
The i2010 approach has delivered important results on the supply side of information society 
developments, in particular in  relation to broadband communicat ions (Chapter 1). With 114 
million subscribers, the EU is the largest worl d market for fixed broadband access with fast 
growth in penetration rates. Half of Europ ean households and more than 80% of European 
businesses have a fixed broadband connection, three quarters of them with average download 
speeds above 2 Mega Bit per second (MB/s). Br oadband internet is available to 93% of the 
EU25 population, up from 87% in 2005. A number of coverage challenges remain, in a reduced number of Member States and in some rural areas. The EU recovery package, highlighting the role of broadband investments as smart spending to ensure the long-term 
sustainability of the upcoming r ecovery, reiterated the importan ce of ensuring broadband for 
all in the near term. Several initiatives have been a nnounced by Member States with the 
objectives of complete coverage and infrastructure upgrades (Chapter 7). 
The rapid spread of faster and cheaper internet access has boosted internet use. In 2008, 56% 
of EU citizens were using the internet on a regular basis, up from 43% in 2005, and nowadays three quarters of them do so every day. This goes in parallel with a rapi d change in habits and 
in the adoption of new ways of  communicating and sharing inform ation (Chapters 4 and 5). In 
2008, 35% of Europeans declared using the Inte rnet for advanced communication services, 
i.e. those services that go beyond the one-t o-one communication syst ems and make possible 
the distribution and sharing of online inform ation, content and applications. Although these 
services do not yet replace trad itional forms of communication, they are getting increasingly 
widespread. Their adoption and use is very much  linked to age: "Digital natives", i.e. people 
between 16 and 34 years old, and especially t hose aged 16 to 24, st and out as the most 
regular, intensive users. 73% of them have used the intern et in the last three months for 
advanced communication services, more than tw ice as much as the population average, and 
they exceed other categories of the population in the use of the internet also for entertainment 
purposes. Digital natives are veritable users of  an interactive borderless space in which 
content and services are made available for activ e users to download, exchange, create and re-
create, distribute, share and re-u se. This is confirme d by the rise in soci al networks and in 
user-created content in the past two years. The continued widening of the internet base and its 
increasing active usage strongly point to the rising social and economic importance of the 
internet and ICT (Chapter 4) and to the signifi cance of the digital revolution challenges ahead, 
such as IPR and single market issues. The continued spread of these technologies will 
constitute both an important starting point for a productivity-led and sustainable recovery and 
a promise for the further development of the sector.  
 
EN 6   EN Continued increases in usage however have not yet compensa ted for certain take-up gaps. 
While broadband is available to more than 90% of EU population, effe ctive take-up attains 
50% of households. The main reasons why house holds do not have an  internet/broadband 
connection relate to a perceived lack of need, costs and skills. These barriers are greater for 
those on lower incomes. Most importantly, one th ird of European citizens have never used the 
internet. Large gaps in internet usage are observed both across count ries and across socio-
economic groups. Digital inclusion is largely dr iven by age and education/income levels: In 
most countries, the largest disparities in in ternet use relate to groups aged 65-74, the 
economically inactive and the low educated (Cha pter 2). Meanwhile, a second digital divide, 
based on quality of use, is emerging. These results suggest the importance of demand-side 
policies which focus on stimulating the use of the internet, reducing psychological and skills barriers, increasing awareness on its possible be nefits, facilitating acces s for the old and the 
disabled, reducing financial barriers and enco uraging the acquisition of skills and life-long 
learning. Although most of these di sparities are due to disappear naturally with the ageing of 
the "digital natives", the intr oduction of new technologies and de vices may give rise to new 
disparities with similar characteristics. 
The use and the development of ICT are also  increasingly embedded in production processes 
throughout the economy. Policies aiming at fo stering ICT take-up by businesses should 
remain mainstream. While take-up of efficien cy enhancing technologies by large enterprises 
is widespread, SMEs are often lagging behind. Us e of key business applic ations such as RFID 
is increasingly extensive for i nventory management systems but also for the labelling of 
single product items. Innovative wi reless technologies will play  a more and more important 
role in the delivery of productivity gains for th e European economy. Policies must ensure that 
European businesses successfully tap into the economic benefits these technologies can offer 
(Chapter 6). 
The ICT sector is highly innovativ e and is being impacted by th e economic crisis, albeit less 
than other sectors of the econom y. While the downturn is exp ected to have a significant 
impact on all sectors, manufacturing segments  are being hit more strongly than service 
segments. The telecom equipment industry, which is Europe's traditional strength, and semiconductors are suffering more than other IC T segments. Service segments (telecoms and 
software) are tempering the crisis thanks to sustained demand for traditional services, while searching for new sources of margins in otherw ise mature markets. The internet industry, on 
the other hand, is weathering the storm better than  any other part of th e sector (Chapter 8). 
The ICT sector is the biggest R&D investing i ndustrial sector and provides other industries 
with productivity enhancing technologies. Firm-l evel analysis, based on companies' annual 
and quarterly reports up to the first quarter of 2009, indicates that the world economic crisis is 
already impacting on R&D levels. Reduced cash flows and credit c onstraints have resulted in 
R&D investment declining pro-cy clically (Chapter 9). Given the economic deterioration and 
the key role played by ICT in  stimulating economic growth, policies that stimulate smart 
investment in ICT are crucial to ensu re a sustainable l ong-term recovery.  
In the context of i2010 ICT policies have be en mainstreamed and have already produced 
tangible outcomes in terms of take-up by both c itizens and enterprises (Chapter 7). In the 
future, national ICT policies need to build on th e achievements of the past, both at a national 
level as well as by learning from best practices  internationally. However, they also need to 
tackle ongoing problem areas as we ll as venture into new territo ry. The digital revolution is a 
prime driver of economic growth and social cha nge. As such, ICT is at the very heart of the 
Lisbon strategy and essential to its success. In times of economic and financial crisis, it is 
 
EN 7   EN important that this key role of ICT is not  forgotten. Investments in ICT are 'smart' 
investments; helping to create and maintain jo bs and growth now, to em erge from the crisis 
stronger and more quickly, while at the same ti me creating the basis for sustainable growth 
and jobs in the future. If we are serious about the Lisbon ambitions we must invest (as least) 
as much in the information highways of the futu re – a smart grid, broadband for all and better 
health care – as we do in more traditional infrastructure.  
 
EN 8   EN 1. THE BROADBAND ECONOMY  
Broadband is the basic infrastructure of mode rn knowledge economies and has been central to 
EU information society policy both in eEurope 2005 and i2010. One of i2010's main 
objectives was the development of a Single Eur opean Information Space offering affordable 
and secure high-bandwidth communications. Fast  broadband access was then considered one 
of the main challenges posed by digital converg ence, along with the need to promote new, 
rich online content, increase interoperability between platforms and devices and raise trust 
amongst investors and consumers through enhanced security. 
Another objective of i2010 was to  stimulate an inclusive Info rmation Society that provides 
high quality public services and promotes quality of life. Di gital convergence offers new 
opportunities but also brings new challenges, including the risk of a widening di gital divide. 
i2010 aimed at expanding the geographical cove rage of broadband to under-served areas. 90% 
of broadband coverage was one of the ma in objectives agreed by ministers in Riga1 in 2006 
and was already achieved by the EU25 in 2007. "Bro adband for all" has been the goal of the 
"Bridging the broadband gap" initiative2 as well as of the recent EU Recovery package3, 
which earmarks around 1 billion euros for the de velopment of broadband communications in 
rural areas. Given the differences in terms of broadband take-up and availability between the 
EU Member States and, within countries, between urban and rura l areas, i2010 insisted on the 
importance of making sure that remote and less populated regions we re not left behind. 
This chapter analyses the main developments in broadband in recent years, focussing on 
performance indicators such as penetration, cove rage, speeds and prices. It concludes with an 
update of the Broadband Performance Index, asse ssing the main strengths and barriers of EU 
Member States to continue progr essing in the broadband economy.  
1.1. Penetration of fixed broadband acce ss between 2003 and 2009: Reducing the 
broadband gap 
Since the launch of i2010 in 2005 the growth of  fixed broadband connectivity in the EU has 
been steady, with high year-on-year growth rate s that in some years equalled more than 20 
million new broadband lines. This has brought about an increase in the number of households 
connected to the internet between 2004 and 2008, from 41 to 60%, of which 80% now have a 
broadband connection. In 2004, only 33% of intern et households had a broadband connection. 
The percentage of enterprises connected to  broadband has increased from 46.5% in 2004 to 
81% in 2008.  
                                                 
1 Proceedings of the ministerial and th e Riga declaration are available at 
http://ec.europa.eu/information_society/activities/einclusion/events/riga_2006/index_en.htm  
 http://ec.europa.eu/information_society/eeurope/i2010/digital_divide/index_en.htm#Broadband_Gap_P
olicy 
2 More information can be found at  
 http://ec.europa.eu/information_society/eeurope/i2010/digital_divide/index_en.htm#Broadband_Gap_P
olicy 
3 More information is available at 
 http://europa.eu/rapid/pressReleasesAction.do?r eference=DOC/09/1&format=HTML&aged=0&langua
ge=EN&guiLanguage=en 
 
EN 9   EN The EU fixed broadband penetration rate (number of fixed br oadband lines per 100 
inhabitants, including both households' and ente rprises' take up) as of 1 January 2008 was 
23% (Figure 1), up from 6.1% in 2004. Alongside fixed broadband, wireless connections have 
started to gain importan ce in the last couple of years as an  alternative way for EU consumers 
to benefit from this service,  even though in general mobile technologies cu rrently allow 
transmission speeds below those of wired technologies4.  
Figure 1 
EU Broadband penetration, January 2009
0510152025303540
SK BG RO PL EL HU PT CZ LV LT CY IT IE ES SI AT EU27 MT EE BE DE FR UK LU FI SE NL DK
 
Source: Communication Committee (CoCom) 
Take-up of broadband has been however uneven, resulting in significant fragmentation across 
Member States. In 2004 there were around 13.5 broadband lines per 100 citizens in Denmark 
and almost zero in Greece. The gap between th e maximum and the mini mum penetration rates 
increased in the aftermath of th e 2004 enlargement of the EU to reach its peak at the end of 
2007, when the difference between the countries w ith the highest and the lowest penetration 
rates attained 28 percentage points (p.p.). One of the main developments in 2008 was a 
change in this trend, as the gap between th e highest and lowest figure reduced (albeit 
slightly)to 26.4 p.p. in January 2009 (Figure 2) and the dispersion of these figures for the 
individual countri es also came down5.  
                                                 
4 Reliable and meaningful data on effective wireless broadband lines ar e however not fully available and 
the Commission is working to improve this side of the i2010 benchmarking framework.  
5 Dispersion of values, which increased in 2007  with the entry of BG and RO, also decreased 
significantly in 2008.  
 
EN 10   EN Figure 2 
The gap in broadband penetration in the EU
19.225.231.935.637.3
8.612.816.32022.9
0510152025303540
2005 2006 2007 2008 2009Highest - lowest broadband penetration rate Broadband gap EU fixed broadband penetration 10.9
7.6
4.4
1.4
0.5
0.1
 
Source: Communications Committee (CoCom) 
The reduction in the gap is  the result of two trends: On the one hand, growth in  countries with 
the highest penetration rates has started to level o ff, as there is less room for organic growth in 
these countries. In 2008 growth in Sweden  was nearly flat and limited to around two 
percentage points in the Neth erlands and Denmark. On the ot her hand, countries with fewer 
broadband lines have experienced significant growth rates over th e last year – 7 percentage 
points in Malta, and more than 4 in Poland, C yprus, Greece or Lithuani a. Yet this positive 
development did not suffice to curve the declin e in the overall number of broadband lines net 
additions, which was of 14 millions in 2008, as against 19 million during 2007 and 21 million 
the year before. The current economic slowdown may put a further brake to the growth in 
broadband take up. 
Finally, the use of a mobile phone via UMTS (3G)  to access the Internet is also increasing. 
Usage is high both in countries with high levels of fixed broa dband, such as Sweden (9.5% of 
individuals) and Denmark (5.9%),  but also in countries with low broadband take-up, like the 
Czech Republic and Slovakia, where respectively 5.3 and 4.8% of individuals used the 3G phone to connect to the Internet
6.  
1.2. Broadband coverage: Towards broadband for all 
Avoiding a new digital di vide - broadband have and have-not s - is another important objective 
of i2010. Broadband allows indivi duals and organisations to co mmunicate and access services 
regardless of their geographica l location. It enables businesse s to communicate with clients 
and suppliers and limits busines s migration to urba n areas. Broadband allo ws households to 
access advanced e-government, e-health and e-learning services, improving their quality of life and their participation into the social and democratic life. By its own nature, broadband 
bridges distances and is partic ularly beneficial to the development and attractiveness of 
remote and rural areas. Neverthe less, broadband roll-out has been concentrating in more 
populated areas because of high investment cost s due to distance and population scarcity.  
                                                
 
6 Source: Eurostat 
 
EN 11   EN Broadband access can be provided through different technologies, either wireline or wireless. 
As the footprint of the traditional telephone ne twork, xDSL is the mostly deployed and used 
access technology in Europe. The second most common fixed access technology is cable 
modem, although limited to a subset of Member States and mainly deployed in urban areas. 
Coverage of DSL and cable modem networks we ll summarises broadband coverage. As these 
two networks tend to overlap, DSL coverage has been used as proxy measurement for 
broadband coverage in Europe. Due to the or ography and distribution of population in some 
countries, 100% coverage of wired networks will probably ne ver be reached. Currently, only 
smaller and flat countries like Luxembourg, De nmark, the Netherlands and Belgium exhibit 
100% rates of rural coverage. Several countrie s do not seem to manage increasing wired 
coverage beyond 90% of rural population. 
The average national coverage of DSL networks in the EU has increased from 87% of 
population in 2005 to 93% in 2007. Important di fferences between countries in 2005 have 
been levelled off over time (Figure 3), increas ing the average coverage rate. Countries with 
lower coverage rates have made significant efforts to improve their standing: Greece 
increased coverage from 0 to 86% in the relevant period. Signi ficant progress has also been 
made by Slovenia, Cyprus, Poland and Slovakia.  
Figure 3 
Growth in DSL national coverage in the EU, 2005-2008 (in % of total population)
0.554692892 0.607423949 0.85 0.823 0.822302071 0.75 0.55 0.860.873839566 0.89 0.697 0.9 0.85 0.920.869966448 0.904 0.884071246 0.926 0.920.934890011 0.99 0.99 0.9639712870.69635750.7792849340.850.860.879585570.90.910.92 0.92 0.9220.93 0.9320.939 0.940.95 0.950.957 0.958 0.960.9690.9790.99 0.990.998 1 1 1 1
0.9946810770.925330832
0.35
0.350.450.550.650.750.850.95
RO PL SK BG EL LV IE LT CZ SI AT EU27 ES CY EE HU IS IT FI NO PT DE SE MT NL UK FR BE DK LU2005 2008 
Source: IDATE7 
Extension of broadband coverage in rural area s is more uneven and can still be considered a 
policy challenge in several countries where broa dband access is available to less than 50% of 
rural population. Progress at EU level has been slower than for nation al coverage: the EU 
average rate has only increased from 66 to 70% (Figure 4). Slovenia, Italy, Germany and 
Sweden concentrated their efforts in reducing the gap between national and urban areas with 
very positive results. Also Austria, Estonia and Ireland made further progress and in these 
countries the role of mobile t echnologies in filling the remaining gap seems to have been 
decisive. Further effort however is needed  in Greece, Bulgaria, Slovakia, Poland and 
                                                 
7 Study on Broadband coverage in Europe: Survey 2009 by IDATE Consulting and Research, 
forthcoming. Previous reports are available at  
 http://ec.europa.eu/information_society/eeurope/i2010/benchmarking/index_en.htm 
 
EN 12   EN Romania, where between 50 and 75% of the rural population cannot  yet subscribe to 
broadband.  
Over the last years, advanced fixed technologies  based on optical fibre bu t especially wireless 
technologies such as UMTS (3G) , WiFi and WiMax and to a ce rtain extent satellite have 
made their inroads into the broadband mark et. Wireless access appears a more suitable 
technology to provide broadband local access in isolated and less populated areas and many 
national broadband policies have promoted their us e in order to ensure universal availability. 
Fully comparable data on wireless broadband co verage are not yet available. The Commission 
has launched a study to gather further inform ation on the actual c overage of wireless 
broadband networks as this form of access is  becoming increasingly common in some 
Member States. 
Figure 4  
Growth in DSL rural coverage in the EU (in % of total population)
0.35 0.249925708 0.663999618 0.546 0.565 0.67 0.76 0.445863619 0.27 0.79 0.79 0.82 0.78 0.66 0.55 0.826692312 0.878512615 0.99 0.9487 1 1 10.250.4250.4347912540.5 0.50.680.70.750.770.80.8180.87
0.820.830.850.860.880.9 0.9 0.90.910.940.99 0.99 0.9941 1 1
0
00.10.20.30.40.50.60.70.80.91
RO PL SK BG EL LV EU27 LT IE EE AT HU IT SI CZ IS PT ES FI SE DE NO FR NL UK BE DK LU2005 2008 
Source: IDATE 
1.3. Increased competition brings higher speeds at lower prices  
The average download speed of broadband subs criptions in the EU has greatly improved 
between 2004 and 2008. At the end of 2008 three quarters of EU broadband subscriptions are 
estimated to be associated to nominal speeds ab ove 2 MB/s, a three fold increase relative to 
2005. This increase in speed has dr iven (and has been driven by) growth in the use of new 
services which has enabled the rise of th e Web 2.0. Speeds are expected to continue 
increasing as high definition vi deo and IPTV become widely used, fast downloading and 
uploading requirements increase and shared in ternet use within households becomes more 
widespread. 
In 2008 operators in many Member  States continued to make plans to deploy  very fast 
broadband connections based on fibre technologies . The extent to which the current economic 
downturn will impact on these plans is not clear yet. But Eu rope is still lagging behind the 
world leaders in high speed broadband especially as regards very fast connections. At the end 
of 2008 less than 5% of all fixed connections pr ovided speeds in excess of 30 Mb/s (Figure 
5). 
 
EN 13   EN Figure 5 
Subscribers by download rates in the EU (DSL, cable modem and FTTH)
0%10%20%30%40%50%60%70%80%90%100%
 December 2005  December 2006  December 2007  December 2008 up to 512 kbps 512 kbps-1Mbps 1-2 Mbps 2-8 Mbps 8-20 Mbps* > 20 Mbps*
 
Source: IDATE. 2008 data refer to 8-30 Mbps and >30 Mbps access lines 
Improvements in average speeds have occurred in parallel with a reduction in prices for 
broadband products. Although retail broadband pri ce comparisons are complex tasks because 
product characteristics, usage cond itions and quality of servi ce greatly differ across offers, 
data indicate that the average price for a br oadband standalone servi ce with download speeds 
between 2 and 4 MB/s has decreased from an average of around €/PPP 52 per month in April 
2007 to about €/PPP 37 in April 2008 and €/PPP 29 in April 2009. Despite this reduction and 
a general trend towards providing more afford able prices, significant differences between 
countries still exist and the pri ce for an equivalent product can be up to five times higher in 
the most expensive countries.  
Figure 6 
Average monthly price of a 2-4 Mb/s broadband standlone access, April 2009
020406080100120
SE RO DK NL SI HU IE LT EE LU EL FI NO BG LV PT BE AT CZ SK PL CY€/PPP
Data for DE, UK, IT, MT, FR, IT and IS not available  
Source: Van Dijk8 
                                                 
8 Study on Broadband Internet Access Costs, 1st semester 2009 , by Van Dijk Management Consultants, 
forthcoming. Previous reports on br oadband access costs are available at  
 
EN 14   EN These positive trends on speeds and prices ar e the outcome of a regulatory framework for 
electronic communication services focused on opening up competition, encouraging lower 
prices and investment and greater choice fo r consumers. The regulatory framework has 
imposed obligations on the former telecom nati onal monopolies in order to facilitate the entry 
in the market of new providers of electroni c communication services so as to create 
competitive dynamics. The market share of the ne w entrants has steadily grown over the last 
years and new operators now se ll 54% of all broadband lines, up from 44% in 2004. However, 
this trend came to an end in 2008, a year in wh ich former incumbent operators on average just 
lost 0.4% of the market share and actually incr eased their share in a number of countries 
(Belgium, Bulgaria, Germany, Spain, Ireland,  Latvia, Austria, Portugal, Romania and 
Sweden). 
But the relative weight of alternative operators is not the only indicator of a healthy 
competitive broadband market. Competition has resulte d in significant level of investment in 
the broadband networks, both by incumbent and new operators. It has also brought about 
innovation and delivered more choi ce for consumers. New offers have emerged: at the end of 
2007, about a third of European households9 subscribed to two or more communication 
services as part of a bundle.  
Data in this chapter refer to fixed broa dband access exclusively. In 2008 use of mobile 
broadband for value added services have starte d to emerge, both in countries where fixed 
broadband penetration and use is very high as well as in some  countries where the reach of 
fixed broadband networks is more limited and mobile broadband is used as a replacement. The Commission is working to gather data on mobile broadband and will report on this 
segment in future benchmarking reports. 
1.4. Indexing Broadband Performance in 2009 
Under the Mid Term Review of the i2010  strategy, the Commission announced the 
development of a Broadband Performance Index (BPI), which was presented in September 
2008
10, following consultation with Member States. The BPI is used to measure the relative 
performance of countries in th e wide broadband economy; to iden tify relative weaknesses and 
strengths of individual countries to fine-t une policy making; and to better understand the 
relative propensity of countries  to progress in the broadband economy. It is structured along 
six dimensions (broadband rural coverage, degree of competition, broadband speeds, broadband prices, take up of adva nced services and socio-economi c context) that are selected 
on the basis of their relevance to the objective of the index. 
This indicator can help the EU and its Member States to better identify strengths and 
weaknesses of their broadband economies. Recogn ition of barriers to further developments 
for example facilitates the desi gn of policy responses. By summarising the various dimensions 
that characterise broadband economies, the BP I complements the information provided by 
penetration rates. 
                                                                                                                                                        
 
http://ec.europa.eu/information_society/eeurope/i2010/benchmarking/index_en.htm 
9 E-Communications Household Survey, June 2008, available at 
 http://ec.europa.eu/information_society/policy/ecomm/doc/library/ext_studies/household_07/eb68_2inf
soecomm_full.pdf 
10 http://ec.europa.eu/information_society/eeurope/i2010/bpi/index_en.htm 
 
EN 15   EN Given the changing nature of the broadba nd economy, including changes in consumption 
patterns, availability of offers and technologi cal take up, the composition of the BPI has been 
slightly modified relative to 2008 (see the annex at  the end of this sectio n). Preference at this 
stage has been given to a better  fine tuning of the index than to comparisons over time. The 
Commission and Member States have also agreed to revise the BPI in future to include data 
on the effective speed of broadband (rather th an the nominal speed) as well as on mobile 
broadband. 
Comparing 2009 results with the penetration rates (Figures 7 and 1 respectively), results show 
that countries such as France and the UK, with lower broadband penetration rates than 
Luxembourg or Finland, are closer to the best  performing countries in the BPI ranking due to 
more positive results in competition, prices or speeds indicators. The BPI also highlights the very important role played by the socio-economic context, which includes indicators such as 
internet skills, penetration of PCs and eff ective use of 3G, which drives for example 
broadband performance in the Nordic countries. 
The results of the BPI demonstrate, with just a few exceptions, that countries with the highest 
ranking have a balanced combination of the different factors. Both Sweden and the 
Netherlands have high levels of broadband coverage and competition, high average speeds 
and relatively cheap prices, with high levels of  take-up of services and of the socio-economic 
context. Denmark, in third place, shares very similar features, but is lagging behind the others because of competition. These three countries are also thos e with the highest broadband 
penetration rates. 
The second group of countries is  characterised by havi ng good scores in all dimensions except 
for one or two. For instance prices are relati vely high in Belgium and Norway and average 
speeds are not particularly performing in the UK and Norway, while the socio-economic 
context is putting a brake on the overall ranking of  France. But these four countries are better 
placed in the BPI ranking than in te rms of broadband penetration rates. 
In countries with lower scores there are imbala nces in the performance of different indicators. 
Finland and Luxembourg, for in stance, which are the countrie s with the fourth and fifth 
highest broadband penetration rate s respectively, score very well in the take-up of services 
and in the socio-economic context, but have expensive prices and limited competition outcomes. In Austria and Germany speeds and take  up of services do not appear in line with 
the good performance of other dimensions.  
Conversely, the Czech Republic, Latvia and Portugalare characterised by good competition 
levels and average speeds but have a medium socio-economic context and take-up of services. 
These three countries have si milar broadband penetration le vels at around 17% of their 
population. Very low ranking in pa rticular dimensions (competition and prices in Spain or 
speed in Malta and Slovenia) co mbined with medium socio-economic context and take-up of 
services brings these countri es to their lower position. Othe r countries such as Hungary, 
Ireland, Italy or Lithuania have low scores in  the socio-economic context as well, coupled 
with either high broadband prices or low speed s, low competition levels or low take-up of 
services.  
Poland, Greece, Bulgaria and Romania are still se verely affected by infrastructure problems 
and low coverage rates, with particularly low levels of competition (except in Romania) and 
high prices in Poland and Greece. Romania and Bu lgaria, where brand new infrastructure is 
being deployed in the absence of traditional telephone networks, display good scores in speed 
 
EN 16   EN and prices. Cyprus has the lowest scores in competition levels, price and speed. The ranking 
of all these countries, which ha ve the lowest broadband penetra tion levels, is also negatively 
affected by low rates in the adoption of advan ced services and by the socio-economic context. 
Figure 7 
Broadband Performance Index, July 2009 
0.000.100.200.300.400.500.600.700.800.90
CY PL EL BG RO IT IE LT SK HU ES SI MT LU IS EE FI AT LV CZ PT DE BE NO FR UK DK NL SESocio-economic context
Take up of advanced services
Speeds
BB price
BB competition*coverage
BB coverage in rural areas
 
Source: Commission Services  
1.5. Conclusions 
Between 2005 and 2009, the European Union has made huge progress in progressing in the 
broadband economy. With 114 million subscribers, the EU is the largest world market and 
shows fast growth in penetration rates. Half of European households and more than 80% of 
European businesses have a fixed broadband conn ection, three quarters of them with average 
download speeds above 2 MB/s. Sector regulation has stimulated more competition, reducing prices and increasing average speeds of broadband connections. Broadband internet is 
available to 93% of the EU 25 population, up from 87% in 2005. 
Nevertheless, coverage challenges remain, in a reduced number of Member States and in 
some rural areas. To support the European econo mic recovery and close the gaps in European 
broadband coverage, the European Economic rec overy package has earmarked more than 1 
billion euros for the developm ent of broadband communicati ons in rural areas to be 
distributed through the Rural Development Programme. To really make this work, Member States need to play an active role in ta rgeting complete broadband coverage. Many have 
already taken up this challenge by aiming at 100% broadband coverage by 2010, or by 2013 
at the latest. Others should follow their lead. 
Another important area for policy action, highlighted in this chap ter, is the need for Member 
states to adopt a more comprehensive approach to broadband roll out. Not only to support the 
supply side, but also to take measures to en courage broadband adoptio n. As availability of 
broadband now remains an issue only in limited part s of the EU, Member States should target 
broadband take up. While keeping a close eye on the evolution of competition, prices and infrastructure upgrades, demand-side actions on e-skills, online public services and awareness 
raising of the broadband benefits shou ld help furthering citizens' uptake. 
 
EN 17   EN Annex: Composition of the BPI and detailed results by dimensions 
 
PLATFORM COMPETITION
*NATIONAL COVERAGE  BB coverage in rural areas  RURAL COVERAGE  
COMPETITION BY 
COVERAGE  
BROADBAND PRICE  BB ACCESS PRICES IN PPP -
Median price 2-4 Mbit/s 
BB ACCESS PRICES IN PPP  – 
Median price 4-8 Mbit/s 
MEDIAN OF THE NORMALISED 
PRICE  
AVERAGE SPEED  
% OF SUBSCRIBERS TO PRODUCTS 
WITH SPEEDS ABOVE 2 MBIT/S 
USE OF INTERNET SERVICES BY 
ENTERPRISES  
INDIVIDUALS DOWNLOADING 
SOFTWARE , MUSIC GAMES , E-GOV 
TRUST E -BANKING AND ONLINE 
PURCHASES (INDIVIDUALS ) 
E-SKILLS (INDIVIDUALS ) SPEEDS  
TAKE-UP OF 
ADVANCED 
SERVICES  
PC PENETRATION AND USE  OF 3G  SOCIO -ECONOMIC 
CONTEXT  
 
 
EN 18   EN BB rural coverage (0 to 1)
0.00.10.20.30.40.50.60.70.80.91.0
Rural coverage 0.00 0.18 0.28 0.29 0.38 0.60 0.61 0.71 0.75 0.77 0.78 0.78 0.81 0.83 0.825 0.84 0.87 0.87 0.88 0.88 0.91 0.925 0.99 0.99 0.99 1.00 1.00 1.00 1.00BG RO PL SK EL LV LT IE EE AT IT SI CZ PT IS HU DE ES FI SE CY NO MT NL UK BE DK FR LU
 
 
  
BB competition and coverage (0 to 1)
0.00.10.20.30.40.50.60.70.80.91.0
Platform competition * 
National coverage0.000 0.035 0.185 0.218 0.299 0.307 0.346 0.350 0.404 0.448 0.483 0.52 0.558 0. 560 0.607 0.621 0.622 0.639 0.641 0.655 0.720 0.727 0.772 0.793 0.860 0.8 79 0.884 0.923 1.000CY LU IE IT PL FI BG EL SK ES DK IS FR DE NO HU SI LT BE EE LV AT NL RO MT UK PT SE CZ
 
 
EN 19   EN BB price (0 to 1)
0.00.10.20.30.40.50.60.70.80.9
BB price. Median offer. 
Basket 4Mbs-8 Mbs 
BB price. Median offer. Basket 2Mbs-4 Mbs 
Median of price/speed
BB price. Median offer. 
Basket 4Mbs-8 Mbs 0.004 0.000 0.042 0.073 0.088 0.091 0.097 0.065 0.092 0.136 0.108 0.127 0. 071 0.129 0.081 0.134 0.118 0.126 0.173 0.103 0.130 0.158 0.157 0.144 0.174 0. 193 0.163 0.220 0.122
BB price. Median offer. 
Basket 2Mbs-4 Mbs 0.000 0.018 0.042 0.070 0.181 0.142 0.149 0.068 0.142 0.089 0.174 0.183 0. 198 0.139 0.170 0.094 0.138 0.202 0.091 0.139 0.121 0.225 0.170 0.217 0.222 0. 210 0.243 0.240 0.131
Median of price/speed 0.007 0.000 0.086 0.116 0.035 0.096 0.084 0.211 0.124 0.134 0.080 0.061 0. 109 0.126 0.185 0.214 0.208 0.162 0.233 0.272 0.267 0.162 0.235 0.208 0.197 0. 249 0.281 0.241 0.536CY PL ES SK LT NO EL IS FI CZ EE IE HU MT LU BE LV SI AT BG PT RO IT NL DK UK SE DE FR
 
 
  
Speeds (0 to 1)
0.00.10.20.30.40.50.60.70.80.91.0% of subscribers to products 
with speeds above 2 Mbs
Average Speed
% of subscribers to products 
with speeds above 2 Mbs0.000 0.009 0.049 0.112 0.113 0.143 0.133 0.127 0.197 0.167 0.216 0.238 0.219 0.254 0.283 0.296 0.142 0.275 0.352 0.376 0.307 0.320 0.281 0.384 0.287 0. 462 0.430 0.321 0.296
Average Speed 0.000 0.045 0.042 0.031 0.067 0.065 0.075 0.113 0.050 0.119 0.088 0.068 0.090 0.076 0.074 0.070 0.256 0.124 0.064 0.069 0.189 0.198 0.259 0.180 0.324 0. 151 0.287 0.446 0.538CY PL MT LT HU NO SI IS IE EL LU AT DE FI UK IT EE FR RO ES DK NL SK PT SE CZ BE LV BG
 
 
 
 
EN 20   EN Take up of advanced services  (0 to 1)
0.00.10.20.30.40.50.60.70.80.9e-banking by individuals
Purchasing online by individuals
Online films, games and music by individuals
Software downloading by individuals
e-Government by individuals
e-Government by enterprises
e-Invoicing by enterprises
e-banking by individuals 0.001 0.021 0.000 0.028 0.008 0.025 0.034 0.026 0.026 0.039 0.042 0.082 0.080 0.049 0.051 0.069 0.055 0.057 0.079 0.078 0.083 0.116 0.101 0.136 0.151 0. 142 0.145 0.158 0.129
Purchasing online by individuals 0.003 0.019 0.000 0.042 0.016 0.018 0.037 0.022 0.017 0.042 0.036 0.043 0.029 0.042 0.051 0.094 0.009 0.101 0.147 0.171 0.094 0.019 0.125 0.131 0.114 0. 111 0.150 0.162 0.162
Online films, games and music by individuals 0.003 0.004 0.020 0.017 0.014 0.000 0.028 0.055 0.015 0.053 0.046 0.029 0.062 0.049 0.050 0.025 0.055 0.016 0.065 0.064 0.076 0.036 0.095 0.069 0.070 0. 079 0.108 0.096 0.085
Software downloading by individuals 0.000 0.016 0.001 0.010 0.014 0.022 0.023 0.042 0.028 0.047 0.043 0.034 0.049 0.032 0.041 0.044 0.028 0.026 0.064 0.074 0.045 0.050 0.075 0.076 0.066 0. 082 0.036 0.115 0.076
e-Government by individuals 0.000 0.012 0.000 0.002 0.002 0.008 0.006 0.032 0.040 0.024 0.014 0.009 0.012 0.034 0.014 0.042 0.041 0.062 0.030 0.036 0.087 0.086 0.051 0.092 0.060 0. 067 0.118 0.098 0.099
e-Government by enterprises 0.012 0.000 0.062 0.041 0.109 0.058 0.105 0.080 0.123 0.066 0.125 0.076 0.052 0.083 0.070 0.101 0.142 0.125 0.065 0.080 0.121 0.109 0.056 0.098 0.156 0. 172 0.142 0.111 0.116
e-Invoicing by enterprises 0.020 0.011 0.031 0.043 0.028 0.059 0.016 0.000 0.044 0.024 0.013 0.048 0.040 0.054 0.076 0.029 0.091 0.056 0.058 0.021 0.045 0.148 0.064 0.049 0.099 0. 069 0.048 0.072 0.158RO CY BG CZ EL IT PL HU PT ES SI BE LV SK MT AT LT IE DE UK FR EE LU SE FI IS NL NO DK
 
 
  
Socio economic context  (0 to 1)
0.000.100.200.300.400.500.600.700.800.901.00% of the pop. using a mobile phone via UMTS (3G) to
access the Internet
Household PC penetration
% of population with some internet skills
% of the pop. using a mobile phone via UMTS (3G) to access the Internet 0.00 0.01 0.00 0.00 0.00 0.06 0.01 0.11 0.04 0.03 0.01 0.13 0.03 0.01 0. 07 0.04 0.00 0.16 0.14 0.11 0.02 0.07 0.09 0.08 0.09 0.09 0.14 0.17 0.24
Household PC penetration 0.12 0.09 0.15 0.19 0.17 0.19 0.20 0.17 0.21 0.20 0.19 0.18 0.24 0.23 0 0.20 0.24 0.21 0.22 0.21 0.28 0.27 0.26 0.26 0.28 0.30 0.29 0.29 0.30
% of population with some internet skills 0.00 0.04 0.06 0.08 0.16 0.10 0.16 0.11 0.13 0.19 0.22 0.18 0.21 0.26 0. 45 0.27 0.29 0.20 0.22 0.26 0.34 0.31 0.30 0.38 0.37 0.42 0.40 0.42 0.37RO BG EL CY LT IT PL PT MT HU LV CZ IE FR IS EE BE ES SI SK DE UK AT FI LU NL DK NO SE
 
 
EN 21   EN 2. REGULAR INTERNET USAGE AND THE E INCLUSION PUZZLE : TACKLING DIGITAL 
DIVIDES  
One of the goals of i2010 was to promote a more inclusive information society. The Riga 
Ministerial Declaration of 2006 se t a number of targets with regard to improving eInclusion. 
They included the halving of disparities in re gular internet use and di gital literacy between 
disadvantaged groups and the EU popul ation as a whole between 2005 and 2010. 
This chapter looks at progress made in reducing di sparities in the level of  regular internet use 
and digital skills across socio-economic groups and countries. It also examines the barriers to 
internet and broadband take up and makes suggesti ons for future policy directions in the area 
of eInclusion. 
The results show that regular internet use has grown substan tially, from 43% in 2005 to 56% 
in 2008, and has become more frequent. It is also  more inclusive, with the most disadvantaged 
groups having progressed the most. Nevertheless, large gaps still remai n, across countries and 
socio-economic groups, and a second digital divi de, based on quality of use, is emerging. 
Empirical evidence shows that digital inclusion is largely driven by age and education levels. 
While educational levels are difficult to influe nce in the short-to-medium term, the results 
suggest the need for policies focusing on encouraging use of the internet, especially by the 
most excluded groups, by reducing psychological barriers and increasing familiarity with its 
possibilities/benefits, facilitating access for th e old and disabled, reduc ing financial barriers 
and encouraging the acquisition of skills and their continuous learning (i.e. Life Long 
Learning). 
2.1. Regular internet use in the EU and its Member States 
Regular use of the internet in Europe has in creased markedly over the lifetime of the i2010 
initiative. On average regular internet use, defi ned as at least once a week, has increased by 13 
p.p. in the EU from 43% in 2005 to 56% in 2008 (Figure 1). This use ha s also become more 
frequent, with 43% of the population (i.e. 77% of regular users) now using the internet almost 
every day, compared to 29% in 2005. 
 
EN 22   EN Figure 1 
Trend in % Internet regular users in the EU, 2005-2008
be
bgczdk
de
ee
ie
gresfr
itcylv
ltlu
hu
mtnl
at
pl
pt
rosiskfise
ukis no
eu27
0102030405060708090100
0 5 10 15 20 25 30
Increase in regular internet use 2005-2008 (percentage points)% regular internet users 2008
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Regular internet usage has risen in all EU 27 Member States a nd in 17 European countries at 
least half of the population are now regular inte rnet users. The countries showing the biggest 
increases since 2005 are Ireland, the Czech Repub lic, France, Hungary, Latvia, and Lithuania. 
The countries with the least improvement are Iceland, Denmark, Swede n, Romania, Estonia, 
the Netherlands, Italy, Cyprus an d Portugal. While low growth in regular internet use in 
countries such as Iceland, Denmark, Sweden and the Netherlands can be attributed to their 
already very high rates of internet usage, in  others, such as Ital y, Cyprus, Romania and 
Portugal, which have some of the lowest rates of regular internet use, it is a source of concern. 
Despite progress, countries' relative rankings have changed little at either end of the scale. 
The best performers in 2008 were the Nordic countries, the Netherlands and Luxemburg. The 
worst performers remained Romania, Bulgaria, Greece, Cyprus, Italy and Portugal. As regular 
internet use in the rest  of Europe expands, thes e countries are being le ft behind. The two main 
exceptions are Ireland and the Czech Repub lic which have improved their positions 
significantly. 
2.2. Disparities in regular internet use acro ss socio-economic groups and the Riga 
goals 
While progress in reducing disp arities in regular internet use has certainly been made , more 
will need to be done if the Riga goals are to be  achieved. The Riga Ministerial Declaration of 
2006 set a number of targets with  regard to improving eInclusion.11 They included the halving 
                                                 
11 See http://ec.europa.eu/info rmation_society/events /ict_riga_2006/index_en.htm . 
 
EN 23   EN of disparities in internet use and dig ital literacy between  disadvantaged groups12 and the EU 
population as a whole between 2005 and 2010.13 
To monitor disparities in internet use and di gital literacy over time, two penetration rate 
indices were developed. The first index measures  disparity in regular internet use between a 
given disadvantaged group and the average for the total population. The second index measures disparities in digital literacy, through a combination of an individual's ability to 
perform one or more internet  and computer related tasks.
14 A value of 1 for the index implies 
equality with the rate for the total population. Values below 1 imply a lower rate than the 
population and those above 1 imply a higher rate than the population. This  section focuses on 
the first index, the one on digital li teracy will be dealt with later. 
The index of regular internet use has increas ed to 0.66 in 2008, from 0.60 in 2005, showing a 
marked improvement (Figure 2). The disadvan taged groups which have made the best 
progress are the low educated (+0.1 p.p.), inac tive and aged 55-64 (+0.08 p.p. each). The least 
progress was made in the group of individuals living in sparsely popu lated areas (+0.01 p.p.). 
This means that the development in regular use of the internet for this group has been similar 
to that of the average EU population. While  there has been good progress in reducing 
disparities with respect to the old, inactive and low educated, th ey remain to a large extent 
digitally excluded. In contrast, the category women, whose starting position was not that 
different from the average, has al ready achieved its Riga target.  
Figure 2 
Internet regular use disparity indicator EU
(1= % of regular internet users in the total population). 
00,10,20,30,40,50,60,70,80,91
aged 55-64 aged 65-74 women low educated inactive unemployed rural2005 2006 2007 2008disadvantaged groups  
index value at 0,66 in 2008
disadvantaged groups  index value at 0,60 in 2005
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Looking across countries, there remain substantial differences in disparities and a number of 
countries have substantially great er disparities in regular inte rnet use between socio-economic 
                                                 
12 Disadvantaged groups were defined as older people, people with disabilities, women, lower education 
groups, unemployed and residents in "less-developed" regions. 
13 Other goals included a 90% target for broadband coverage, increased coverage of underserved locations 
and reduced regional disparities in Internet access, a ta rget of 100% accessibility of public web sites and 
commitments on fostering cultural diversity in the information society. 
14 See "Benchmarking from a policy perspect ive – eInclusion report", December 2006 
 
EN 24   EN groups than the EU average (Table 1). The countri es with the largest disparities are Romania, 
Greece, Bulgaria, Cyprus, Portugal, Slovakia, Spain, Lithuania, Slovenia and Italy. By 
contrast, the countries exhibiting the strong est degree of equality are the Netherlands, 
Sweden, Norway, Denmark, Finland and Luxem burg. This pattern co rresponds largely to 
countries' overall connectivity. I ndeed the correlation coefficien t between the percentage of 
regular internet users in the population as a whole and the degr ee of disparity in regular use 
across countries is 0.94. 
When it comes to the performance of specifi c disadvantaged groups, again most countries 
have the largest disparities in internet use for the groups  aged 65-74, the economically 
inactive and the low educated. The group which e xhibits the largest vari ation in disparities 
across countries is for those aged 55-64.15 While in countries such as Norway, the 
Netherlands, Denmark and Luxemburg there is ve ry little inequality, in others, such as 
Romania, Cyprus, Greece and Bulgaria, there are very large disparities. 
Table 1 
 aged 55-64  aged 65-74  women  low educated inactive  unemployed  rural  total at risk 
index 
eu27 0.68          0.30           0.95      0.63              0.45    0.80              0.82             0.66            
be 0.73          0.32           0.92      0.67              0.52    0.77              0.92             0.69            
bg 0.33          0.04         0.97      0.45              0.15    0.55              0.64             0.45           
cz 0.53          0.16           0.94      0.80              0.31    0.55              0.90             0.60            
dk 0.85          0.51           0.98      0.85              0.56    0.84           0.94             0.79           
de 0.76          0.37           0.91      0.87              0.54    0.84              0.87             0.74            
ee 0.52          0.24           1.00      0.82              0.39    1.03              0.94             0.71            
ie 0.54          0.26           1.00      0.53              0.53    0.77              0.82             0.64            
gr 0.33          0.03           0.85      0.27              0.18    0.85              0.70             0.46            
es 0.43          0.14           0.92      0.51              0.29    0.88              0.78             0.56            
fr 0.71          0.35           1.02      0.73              0.52    0.97              0.90             0.74            
it 0.54          0.16           0.86      0.46              0.27    0.86              0.84             0.57            
cy 0.31          0.11           0.91      0.37              0.29    1.00              0.69             0.53            
lv 0.46          0.11           0.96      0.79              0.32    0.63              0.91             0.60            
lt 0.44          0.10           0.98      0.68              0.24    0.62              0.84             0.56            
lu 0.83          0.51           0.86      0.79              0.73    0.62              1.01             0.76            
hu 0.61          0.27           0.98      0.61              0.45    0.71              0.86             0.64            
mt 0.41          0.24           0.93      0.63              0.39    0.74              1.00             0.62            
nl 0.88          0.49           0.96      0.78              0.70    1.14              0.95             0.85            
at 0.68          0.35           0.89      0.65              0.52    0.88              0.89             0.69            
pl 0.43          0.06         0.98      0.70              0.30    0.57              0.82             0.55           
pt 0.45          0.11           0.89      0.58              0.21    0.76              0.76             0.54            
ro 0.27          0.04           0.96      0.54              0.12    0.69              0.58             0.46            
si 0.48          0.08           0.98      0.54              0.19    0.73              0.94             0.56            
sk 0.45          0.10           0.95      0.66              0.27    0.45              0.97             0.55            
fi 0.78          0.37           0.99      0.81              0.56    0.90              0.95             0.77            
se 0.92          0.53           0.98      0.81              0.64    1.04              0.98             0.84            
uk 0.79          0.41           0.94      0.47              0.56    0.83              0.90             0.70            
is : : : : : : : :
no 0.88          0.45           0.97      0.86              0.66    0.91              0.99             0.82            
Max. 0.92          0.53           1.02      0.87              0.73    1.14              1.01             0.85            
Min. 0.27          0.03           0.85      0.27              0.12    0.45              0.58             0.45            
Range 0.65          0.50           0.17      0.59              0.61    0.69              0.44             0.40            
S.D. 0.19          0.16           0.04      0.16              0.18    0.17              0.11             0.12            
Note: Figures in italics are for 2007, except for Poland where it is 2006Index of internet use in at risk groups by country in 2008
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
                                                 
15 Measured by the standard deviation. 
 
EN 25   EN 2.3. Barriers to household take up of the internet 
Despite progress made in regular internet use, about a third (33%) of the population of the EU 
had never used the internet in 2008 (which is nevertheless a significant improvement over 
2007, when the figure was 40%), 27% had never used  a computer and an even larger number 
had no internet access at home (40% in 2008). 
According to the Community Survey on ICT us age in households and by individuals (2008), 
the main reason for not having internet in the home relates to the pe rceived lack of need 
(Figure 3); 38% of households re sponded that this was a reason for not having internet at 
home. Other important factors are costs for equipment (25%) and access (21%), as well as a lack of skills (24%). The least important reas ons relate to privacy and security concerns
16 
(5%) and physical disability (2%). The importance of these factors has not changed over time. 
Figure 3 
Reasons for not having Internet at home (2008)
05101520253035404550
Access costs Physical
disabilityAccess
elsewhereEquipment
costsDon't need Privacy or
security
concernsLack skills Don't want Other reasonsTotal
Single parent with dependent children
All types with dependent children
Households living in sparsely populated area (less than 100
inhabitants/Km2)
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
With regard to physical disabili ty, however, this does not mean that it is not an important 
reason for not having the internet, only that out of  all households it is only relevant for a small 
number of them. A more important  question is whether and to what  extent for disabled people 
their disability is a reason for not having  the internet. Recent findings of a study 
commissioned by the European Co mmission on the status of 'eA ccessibility' in Europe shows 
that people with disabilities do indeed contin ue to face significant barriers to usage of 
everyday ICT products and services (Box 1). 
                                                 
16 In a separate context, a 2008 Eurobarometer Survey on citizens' perceptions in relation to data 
protection showed that a large majority of respondents (82%) considers that data transmission over the 
internet is not sufficiently secure while only 15% of  respondents trust data s ecurity transf ers over the 
internet. See http://ec.europa.eu/public_opinion/flash/fl_225_en.pdf 
 
EN 26   EN  
Box 1: Overview of the results of the study  on "Measuring Progress of eAccessibility in 
Europe" 
In 2005, the European Commission pr oduced a Communication on eAccessibility1 highlighting the 
need for improving access to Information and Communication Technologies (ICTs) by people with 
disabilities. Three key approaches for EU-level policy intervention were identified: the application of 
accessibility requirements in public procurement (u tilising freedoms given to Member states in 
transposing the Public Procurement Directives); th e introduction of a product and service certification 
scheme; and better use of existing legislation (e.g. in telecommunications and employment).It also 
announced that a follow-up on the eAccessibility s ituation would be made two years after the 
Communication, at which time the Commission might consider additional measures. 
As part of the follow-up to the Communication,  the "Measuring progress of eAccessibility in Europe" 
(MeAC) study was launched and the results of this study were first published in 2007. A follow up 
report on the eAccessibility status situation as well as detailed country profiles were elaborated one 
year after the main benchmarking exercise had been  conducted in 2007. The evidence collated in 2008 
suggested that no significant changes in the ove rall eAccessibility status had taken place since 2007 
and that the main conclusions remained valid. 
These conclusions were that there was only lim ited progress towards eAccessibility detected in 
Europe, and further EU-level measures needed to be considered to stimulate progress in 
eAccessibility. Three key findings underpinned this conclusion: 
The eAccessibility ‘deficit’:  People with disabilities in Europe continued to be confronted with many 
barriers to usage of the everyday ICT products and services that are now essential elements of social 
and economic life. Such eAccessibility deficits c ould be found across the spectrum of ICT products 
and services, for example telephony, TV, web and self-ser vice terminals. With regard to the internet, it 
was found that very few websites met accepted inte rnational accessibility standards: in 2008, 20% 
were accessible based on automatic testing and only  2.9 % based on more stringent manual testing. 
The figures were somewhat higher for governmental websites, but significantly lower for 
sectoral/commercial ones. 
The eAccessibility 'gap':  From a comparative perspective, the eAccessibility situation for people with 
disabilities across Europe as a whole, in terms of both eAccessibility status and eAccessibility policy, 
compared very unfavourably with that of compar ison countries examined in the MeAC study (AU, CA 
and US). While, international comparison showed the relatively weak situation in Europe with regard 
to eAccessibility it also showed that it w as not unrealistic to aim for a stronger one. 
The eAccessibility ‘patchwork’:  Finally, the situation across Eur ope for both eAccessibility status 
and eAccessibility policy was very much a 'patchwo rk'. The overall picture showed many important 
gaps, uneven attention across the spectrum of eAcc essibility themes, and wide disparities across the 
Member States. 
Further, the study also showed a strong relationshi p between eAccessibility status and policy, showing 
that good policy and good eAccessibility status we re strongly linked, providing support for policies in 
the area of eAccessibility. The study also highlighted the positive impact that EU level policy had had, 
but also that further EU-level measures needed to be considered. 
1 http://ec.europa.eu/information_so ciety/activities/einclu sion/policy/accessibility /com_ea_2005/index_en.htm  
Across different socio-economic groups the pict ure varies somewhat. In particular, for 
households with children, the main reasons relate  to access and equipment costs. This is even 
 
EN 27   EN more so the case for single parents with childr en. On the other hand, for these two groups lack 
of skill and a perceived lack of need play a sm aller role. This suggests that, for some groups, 
income/financial issues are still an important barrier to internet take up at home. Interestingly, 
the data also show that for t hose living in sparsely populated regions the reported reasons for 
not having the internet at home are basically th e same as for the popula tion at large, showing 
that living in a rural area does not  affect people's perceptions. 
Looking at reasons for not having the inte rnet at home by income group confirms the 
importance of financial barriers for those on lo wer incomes (Figure 4). Access and equipment 
costs are, obviously, more important the lower th e income. However, this also holds true for 
other reasons such as lack of skills, the perceived lack of need and not wanting internet at home. On the other hand, having  access elsewhere is a more important reason for not having 
access at home the higher the income. 
Figure 4 
Reasons for not having Internet at home by income group (2008)
051015202530354045
Access costs Physical
disabilityAccess
elsewhereEquipment
costsDon't need Privacy or
security
concernsLack skills Don't want Other reasonsTotal Number of households with income in first quartile Number of households with income in second quartile
Number of households with income in third quartile Number of households with income in fourth quartile
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
2.4. Barriers to broadband take-up 
Given the strong correlation between intern et and broadband penetration (0.92 across 
countries), it is not surprising that the barrier s to broadband adoption are similar to those of 
internet use. Looking at the figures for broa dband penetration across various socio-economic 
groups indicates a strong role for income in  determining penetra tion rates (Figure 5). 
Households with income in the first, or lowest , quartile have a rate of  penetration less than 
half that of those with income in the fourth quartile.17 The data also show that households in 
sparsely populated and lagging re gions also have significantly lo wer rates of penetration. By 
contrast, households with childre n have higher rates of take up. 
Data also show that strong in creases in broadband penetrati on have taken pl ace across all 
groups. In particular the situation of single pa rents with children has improved markedly and 
                                                 
17 The lowest, or first, income quartile refers to the group of people falling into the lowest quarter of the 
income distribution. The fourth quartile is the gro up of people in the highest quarter of the income 
distribution. 
 
EN 28   EN whereas this group was lagging in  2005 it now has a higher rate  of penetration than the 
average. Weakest progress has been made in le ast developed regions and sparsely-populated 
areas, which remain behind the average.  
Turning to data on the reasons given for not having broadband at home also confirms the 
strong role of cost and a percei ved lack of need (Figure 6). A nother important reason is lack 
of availability. For people in sparcely populated  regions this is the most important reason. 
Figure 5 
Broadband penetration by type of household (%)
01020304050607080
All households Single parent with
dependent childrenAll types with
dependent childrenHouseholds in least
developed regionsHouseholds living in
sparsely populated
area (less than 100
inhabitants/Km2)Number of
households with
income in first
quartileNumber of
households with
income in second
quartileNumber of
households with
income in third
quartileNumber of
households with
income in fourth
quartile
2005 2006 2007 2008 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Figure 6 
Reasons for not having broadband at home (2008)
051015202530354045
too expensive no need not available have access elsewhere other reasons% of households without broadband access
All households single with children children least developed regions densely populated sparcely populated 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
2.5. Results of econometric studies 
Socio-economic characteristics influence each other.  Therefore, in order to isolate the impact 
of individual factors on internet /broadband take-up it is necessary to undertake econometric 
 
EN 29   EN analysis on microdata for indivi duals/households. Studies of this  type suggest that age and 
education are the two most important factor s influencing internet  take-up (Figure 7).18 19 
Figure 7 
Individuals who used the Internet at least once a week, by age and level of education, 
EU27, 2008 (%)
0102030405060708090100
EU avg Aged 16-24 Aged 25-54 Aged 55-74no or low formal education
medium formal education
high formal education
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
The important role of education in determining internet take-up is intuitively easy to 
understand, given the reported reasons for not having internet, as the level of education is an 
important determinant of income, is likely to a ffect levels of (digital)  skills and could also 
influence the perceived lack of need for using the internet. 
The finding that a large number of households without internet  access respond that they don’t 
need it will partly reflect choice and partly unfamiliarity with its benefits and the services 
available. In response, many countries are laun ching awareness campaigns to ensure citizens 
can make an informed choice. In relation to affordability, a gradual reduction in access and 
equipment costs, due in part to competitive markets promoted by the regulatory framework, 
will reduce this barrier. The importance of digi tal literacy policies is confirmed by the high 
proportion of households without internet access citing lack of  skills as one of the main 
barriers to having internet at home. 
                                                 
18 As reported in OECD (2008), analysis of this kind, undertaken for France by Frydel (2006), shows that 
age and education are the main fact ors influencing internet access. A study for Japan, und ertaken by the 
Ministry of International Affairs and Communication of Japan (2006), also showed that age was the 
most important factor, followed by income. Smaller impacts were observed for city size and gender. A cross-country study by Cette and Lopez (2008) also  confirms the important role of education in 
determining cross-country differences in ICT usage. Another important factor is the role of labour and 
product market rigidities.  
 Analysis undertaken by European Commission staff based on micro data from the 2008 Eurobarometer 
survey and using the logistic method, found similar results for the EU. In particular, the analysis 
showed that the low educated (1 7.4%), inactive (21.1%), old (34. 2%) and, to a lesser extent, the 
unemployed (49.3%) have significantly lower chances of being regular internet users than individuals 
not falling into these socio-economic groups. 
19 See also Eurostat (2008), Internet usage in 2008 – Households and Individuals. Data in Focus Issue no 
46/2008, and JRC-IPTS (2008), Digital Competence for Lifelong Learning, JRC Technical Note: JRC 
48708, available at http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=1820   
 
EN 30   EN 2.6. Disparities in Digital Literacy 
Since 2005, progress has also been made in  reducing digital l iteracy disparities , though as 
with regular internet use, more will need to be done if the Riga targets are to be met.20 Over 
the period 2006-2007 the digital l iteracy disparities index in creased from 0.64 to 0.68, 
reflecting an overall reduction in digital literacy disparities (Figure 8). A reduction in 
disparities can be observed  across all the disadvantaged  groups, with the biggest 
improvements being made in the categories exhib iting the largest disparities: those aged 65 to 
74, the economically inactive and the low edu cated (all +0.05 p.p.). However, those in 
categories exhibiting the largest disparities re main largely excluded. The categories showing 
the least improvement are those which are closes t to representing the average: women and the 
unemployed (both +0.02 p.p.). 
Looking directly at developments in the rates of digital literacy  (Table 2), the development in 
internet skills shows a positive trend ove r the period 2006 to 2007,  both for the total 
population (+5 p.p.) as well as fo r individual disadvantaged gr oups, with in pa rticular the 
unemployed showing a marked improvement (+7 p.p.). Computer skills have also increased 
across all groups, for the period 2006 to 2007, with this time the group of those living in rural 
areas showing the biggest improvement (+5 p.p.) . The data show a very high correlation, 
almost one in 2007, between computer and internet skills within all the observed groups. As a 
result, the lowest level of both categories of skills is f ound among the old, inactive and the 
low educated. 
Figure 8 
Digital Literacy Disparities
(1 = digital literacy indicator average in total population)
0.240.89
0.420.91
0.84
0.290.91
0.610.93
0.88
0.560.63
0.470.66
0.00.10.20.30.40.50.60.70.80.91.0
55 to 64 index 65 to 74 index Women index Low education index economically
inactive/retired indexUnemployed index Rural areas index2006 2007Total index value 
2007: 0,68
Total index value 2006: 
0,64
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
                                                 
20 While the index can be calculated for the years 2005 to 2007, comparability over this period is 
hampered by a change in the questions related to computer skills, which differ between the years 2005 
and 2006/2007 (no data on skills are available for 2008) . As a result, on first comparison, it appears that 
digital literacy disparities have actually increased ov er the period 2005 to 2007, represented by a 
reduction in the index value from 0.69 to 0.68. However, looking at the comparable data for the years 
2006 and 2007, an improvement can be observed. 
 
EN 31   EN Table 2 
EU total aged 55 to 64 aged 65 to 74 women low educated inactive unemployed rural
2006 55 34 13 51 32 22 48 46
2007 60 39 17 56 37 27 55 52
EU total aged 55 to 64 aged 65 to 74 women low educated inactive unemployed rural
2006 57 37 16 54 35 25 54 48
2007 60 40 19 57 38 29 57 53Digital Literacy
Computer skillsInternet skills
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Looking across countries shows that the pattern of digital literacy di sparities is similar to that 
for "regular use" (Table 3). Indeed, the corre lation across countries be tween the disparities 
index for "regular internet use" and "dig ital literacy" is greater than 0.95. The worst 
performers in terms of digital literacy dispar ities are Bulgaria, Romania, Latvia, Lithuania, 
Greece, Malta, Poland, Cyprus, Portugal, Sloveni a, Italy, and Hungary. The best performers 
are Norway, the Netherlands, Sweden, Icela nd, Denmark, Germany, Luxemburg and Finland. 
In terms of specific disadvantaged groups, most countries have the largest disparities for the 
groups aged 65 to 74, the economically inactive and the low educated. The groups exhibiting 
least disparities are women, the unemployed a nd those living in rural areas. Indeed, in a 
number of countries, the digital literacy of women and the unemployed is greater than that for 
the population as a whole (i.e. greater than 1). The group which shows the largest variation in 
digital literacy disparit ies across countries, measured by the standard deviation, is the group of 
the low educated. 
As with the total index, digital literacy disparities of specifi c disadvantaged groups are highly 
correlated with disparities in regular intern et use. The main exception is for 'women'. 
However, this is mainly due to the lack of va riation in the data for this group, given its overall 
high level of equality with the EU average for both regular internet use and digital literacy 
disparities. 
 
EN 32   EN Table 3 
aged 55 to 64 aged 65 to 74 women low educated inactive unemployed ruraltotal at risk 
index
eu27 0,66 0,29 0,91 0,61 0,47 0,93 0,88 0,68
be 0,70 0,30 0,93 0,65 0,49 0,88 0,85 0,69
bg 0,37 0,04 0,74 0,28 0,12 0,42 0,60 0,37
cz 0,56 0,17 0,89 0,73 0,40 0,64 0,91 0,61
dk 0,86 0,58 1,09 0,95 0,60 0,97 0,93 0,85
de 0,81 0,44 1,03 0,93 0,60 0,93 0,95 0,81
ee 0,51 0,15 0,91 0,78 0,35 1,02 0,92 0,66
ie 0,50 0,25 0,94 0,46 0,54 0,90 0,88 0,64
gr 0,30 0,07 0,74 0,25 0,25 1,30 0,84 0,54
es 0,42 0,15 0,90 0,52 0,35 1,00 0,82 0,59
fr 0,64 0,22 0,95 0,76 0,49 1,08 0,94 0,73
it 0,53 0,12 0,75 0,40 0,28 1,06 0,90 0,58
cy 0,35 0,11 0,82 0,31 0,33 1,27 0,70 0,56
lv 0,47 0,11 0,91 0,67 0,38 0,58 0,90 0,57
lt 0,35 0,07 0,87 0,65 0,23 0,58 0,78 0,51
lu 0,85 0,49 1,01 0,89 0,61 0,78 1,02 0,81
hu 0,60 0,19 0,94 0,52 0,41 0,64 0,83 0,59
mt 0,43 0,21 0,81 0,55 0,37 0,93 1,02 0,55
nl 0,81 0,52 1,08 0,89 0,68 1,13 0,98 0,87
at 0,71 0,40 1,00 0,70 0,57 0,96 0,92 0,75
pl 0,40 0,07 0,84 0,65 0,30 0,78 0,88 0,56
pt 0,46 0,10 0,80 0,56 0,23 0,98 0,80 0,56
ro 0,30 0,03 0,70 0,38 0,16 0,76 0,44 0,39
si 0,48 0,13 0,94 0,51 0,24 0,78 0,92 0,57
sk 0,43 0,14 1,02 0,65 0,37 0,75 0,97 0,62
fi 0,77 0,36 1,03 0,84 0,53 0,92 0,92 0,77
se 0,85 0,60 1,04 0,90 0,67 1,04 0,96 0,87
uk 0,78 0,37 1,00 0,41 0,57 0,68 1,02 0,69
is 0,87 0,65 1,14 1,04 0,62 0,81 0,95 0,87
no 0,80 0,67 1,10 1,02 0,68 1,01 0,96 0,89
Max. 0,87 0,67 1,14 1,04 0,68 1,30 1,02 0,89
Min. 0,30 0,03 0,70 0,25 0,12 0,42 0,44 0,37
Rang e 0,57 0,64 0,44 0,79 0,56 0,88 0,58 0,52
S.D. 0,19 0,20 0,12 0,22 0,16 0,20 0,12 0,14
Note: Figures in italics are for 2006 except for Malta where they are 2005Index of digital literacy disparities in at risk groups by country 2007
 
2.7. The emerging Second Digital Divide 
Going beyond basic use of the internet, policy on eInclusion also recogn ises the importance of 
reducing disparities in the quality of internet use, the so-called Sec ond Digital Divide. Data 
show that digital disparities al so exist between socioeconomic gr oups with regard to the types 
of activities undertaken and the in tensity with which they are pe rformed. Results suggest that 
while all internet users, regardless of age or education, use the internet for communication and 
for access to information, there are sharp differences, particularly by age, for the more advanced services (Figure 9). 
 
EN 33   EN Figure 9 
Quality of Use
0102030405060708090100
All Individuals age 16-24 age 25-54 age 55-74 with no or low
educationwith medium
educationwith high education%  of internet users 
who have posted messages to chat rooms, forum… who have sent an email with attached files
who have used a search engine to find information who have used peer-to-peer file sharing for exchanging movies, music, etc.
who have used the Internet to make phone calls 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Users with higher educati onal levels use the internet more in tensively, in particular for online 
transactions and electronic public services (Figure 10). Not only do those with higher 
education use these services more, they also use them to a higher level; using more, and more 
complex, functionalities. This is shown, for ex ample, in the use of eGovernment services 
where those with tertia ry education are far more likely to  go beyond basic information and use 
the internet to submit forms and carry out transactions. 
Figure 10 
The Second Digital Divide
Level of Education and Use of Internet, 2007
35
3133
28414344
4047566279
0102030405060708090
looking for health related
informationinternet banking eGovernment eCommerce% of online users
low education medium education high education
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
2.8. Conclusions 
While i2010 has delivered significa nt progress in the area of eInc lusion, it is clear that more 
will need to be done to close digital divide s and achieve the ambitious Riga goals. Gaps 
 
EN 34   EN continue to exist in regular us e of the internet a nd digital skills, both across countries and 
socio-economic groups. In particular, the most digitally excluded groups at the start of the 
initiative remain so. Across socio-economic groups, the old, economically inactive and low 
educated remain to a large extent digitally excluded. In addition, th ere remain significant 
barriers to the use of ICTs by the disabled. 
The evidence shows that the main reported reasons for households not to have an 
internet/broadband connection relates to a perceived lack of need, costs, and lack of skills. These barriers are larger for those on lower in comes. Empirical analysis shows that these 
factors are to a large extent re lated to age and education levels . They are also major factors 
determining the quality of use (the so called Second Digital Divide). Further, while only a 
small number of respondents repo rt that disability is a reason for not having the internet at 
home, this remains an important barrier to internet access at home for the disabled; as 
confirmed by the results of a recent Europ ean Commission funded study on the status of 
eAccessibility in Europe. 
While educational levels are difficult to influence in the short-to-medium term, these results 
suggest the need for policies focusing on encourag ing the use of the internet, especially by the 
most excluded groups, by reducing psychological barriers and increasing familiarity with its 
possibilities/benefits, facilitating access for th e old and disabled, reduc ing financial barriers 
and encouraging the acquisition of skills and their continuous learning (i.e. Life Long 
Learning). With regard to the latter, evidence shows that there is an increasing tendency for 
informal acquisition of ICT skills. Therefore, there is potential to encourage more formal 
training as well as informal training, which can be conducive to reducing both first and 
second digital divides. 
Finally, while perhaps intuitive, it should be hi ghlighted that an eInclusion strategy focused 
on the inclusion of digitally ex cluded groups also targets an ove rall improvement in internet 
use. Supporting this intuition is the empirical ev idence which shows that rates of regular use 
are highly correlated with meas ures of digital disparities. 
 
EN 35   EN 3. THE IMPACT OF ICT  ON SOCIAL CAPITAL  
3.1. ICT and social capital 
The term "social capital" refers to the norms  and social relations embedded in the social 
structures of societies that enable people to  co-ordinate action to achieve desired goals.21 An 
ongoing Commission Study has analysed data from  the 2008 Flash Eurobarometer survey: 
"Information Society seen by the citizens"22 to draw conclusions on the relation between ICT  
take-up and social capital a nd, more in general, with th e well-being of individuals.  
Previous studies warned about potential negative effects of ICTs on social capital, as the 
internet may create superficial relationships as the time spent online reduces time devoted to face-to-face relationships. Furthe r analysis showed that although this might be true, the 
internet appears to create a new type of social capital linked to community involvement, and that it might support existing face-to-face relationships by acting as an additional 
communication device, therefore incr easing stocks of social capital. 
The 2008 evidence above suggests that Internet use is associated with  increased likelihood 
that users engage in civic activities (participation in so cial organizations
23) within similar 
social backgrounds. While about half of internet  users reported their pa rticipation in social 
activities, only a third of non-inte rnet users did so (Figure 1). Si milarly, frequent internet use 
is associated with higher le vels of generalised trust24 (Figure 2). 
The cross-sectional data used in  the analysis do not allow conc luding that the internet has a 
one way enhancing effect on soci al resources, as this can work the other way around too25. 
Those with less social resources  may be the ones who have fe wer motivations or opportunities 
for using ICT and those who are rich in social  resources might be more motivated for using 
the internet more frequently. In fact, most of the available analyses on the digital divide do 
suggest that the interrelation is one of reciprocal amplification.26 
                                                 
21 http://stats.oecd.org/glo ssary/detail.asp?ID=3560  
22 http://ec.europa.eu/public_opinion/flash/fl_241_en.pdf  
23 Like sports clubs, religious/voluntary aid organizations.  
24 Trust is measured through the following question: "G enerally speaking, would you say that you can't be 
too careful in dealing with people, or that most people can be trusted?" (0=no trust, 10=full trust). 
Having said that, medium level of trust corresponds to a score between 4 and 6 and high level of trust to 
a one from 7 to 10. 
25 Causality testing would require the availability of panel databases to look at the changes in the social 
activities of individuals once they have started to use the internet. Neither panel data nor time series for this type of information are currently available. 
26 Van Dijk, J. (2005) "The deepening divide. Inequality in the information society", Thousand Oaks, 
Sage. 
 
EN 36   EN Figure 1  
Participation in social organizations and internet access/use
21.7%
13.5%15.0%26.6%
19.8%18.9%
0%10%20%30%40%50%60%
Uses Internet Has access, but does not use No access
Participation in social organizations: Less than once a week Participation in social organizations: At least once a week 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society 
seen by the citizens (2008) 
Figure 2  
Trust and internet access/use
0.459 0.455 0.4470.362
0.2820.275
0%10%20%30%40%50%60%70%80%90%
Uses Internet Has access, but does not use No accessMedium level of trust High level of trust
 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society 
seen by the citizens (2008) 
Internet users are also much more active in soci al leisure activities than non-users (Figure 3). 
They are more likely to enga ge in active sport (64% of them weekly vs. 40% among non-
users), more than twice as likely to go to th e cinema/theatre/other performance and also more 
than twice as likely to visit a restaurant/café/pub /bar/club in a given period of time. They also 
tend to meet friends more often. Internet use is positively associated with engagement in 
social leisure activities independently  from the socio-demographic background. 
 
EN 37   EN Figure 3 
Leisure activities (at least once per week) and internet access/use
0.392
0.0540.2040.692
0.418
0.0640.2540.706
0.641
0.1360.4520.848
0%10%20%30%40%50%60%70%80%90%
Sport Going to cinema, theatre, performances Eating out Meeting friendsNo access Has access, but does not use Uses Internet 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society 
seen by the citizens (2008) 
Internet use is generally expect ed to relate to a d ecline in television watching. TV watching is 
more frequent among older and lower educated people who typically do not use the internet. 
However, when comparing internet users and no n-users of similar soci al background, there is 
no difference in the frequency of TV watching.  
3.2. A typology of internet use 
Multivariate analysis27 has allowed the development of a conceptual typology of ways of 
internet use: recreational, re source enhancing and instrume ntal (Table 1). A person is 
considered to be a recreational, resource enhanc ing or instrumental user if she/he pursues 
more of the respective activities than the aver age user. Recreational us e is associated with 
playing, downloading media or software, using social networking sites, sharing videos and 
photos, etc. Instrumental usage includes buyi ng and selling, eBanking and dealing with the 
public administration. The resource-enhancing us e includes e-learnin g, reading the news, 
social networking and work.  
Table 1: Typology of internet uses 
Recreation Resource enhancing Instrumental 
Playing and downloading 
Sharing media 
Transferring to other devices Learning online 
Social networking 
Following the news 
Work eBanking 
Buying and selling online 
eGovernment 
 
                                                 
27 As the term indicates, "multivariate analysis" refers to techniques dedicated to the analysis of data sets 
with more than one variable.  
 
EN 38   EN The categories are not mutually exclusive (Figure 4). About one  quarter of EU27 internet 
users are "all-round users", mean ing that they fall under all ca tegories. On the contrary, 18% 
of EU27 users make "tentative users": they us e e-mails and search engines but have not yet 
engaged in more advanced applications.  
Figure 4 
 
Results reveal that instrumental and resour ce enhancing users have higher chances to be 
active in civic organisations, coincide with an increase in general trust and are positively correlated with leisure time spent on social activ ities (Figure 5). When interpreting the results, 
it is important to bear in mind again that  a clear causality cannot be established.  
Figure 5  
The impact of type of Internet use on having social leisure time
0.070.250.41
0%5%10%15%20%25%30%35%40%45%
Instrumental use Resource enhancing use Recreational useEach bar indicates the changes of odds of having more social leisure time than the European average compared to the baseline ca tegory. Baseline category is that of the tentaive Internet users. 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society seen by the 
citizens (2008) 
The previous chapter has highlighted the main sources of digital divides and indicated that 
people with different social b ackgrounds have different access to information technologies.  3.4%9.2%
6.5% 10.5%24.0%
12.5%15.8%
Recreational Instrumental
Resource 
enhancing Tentative: 18.2% 
 
EN 39   EN Among internet users, younger people tend to us e it more often than older people; more 
educated people use it more often than less edu cated people, and urban residents more often 
than people residing in rural areas. Non-worki ng users feature a higher frequency of usage 
than working internet us ers (because the former group includes students).  
Recreational usage shows str ong, negative associati on with age. The resource-enhancing 
mode of use also decreases with age. This tr end does not emerge in th e case of instrumental 
use (uptake is highest in the medium aged gr oup). Each of the three types of use increases 
significantly with education, show ing that less educated people tend to use the internet for 
fewer and less advanced purposes. Persons re siding in urban areas tend to display an 
extensive rather than a tentativ e use of the internet. Finally, manual workers use the internet 
less often for resource enhanci ng and instrumental purposes than  employees, but the intensity 
of recreational use among them is almost the same. This may indicate a situation where 
manual workers are less likely to use the internet as part of their job, and as such are less 
likely to learn about the manifo ld opportunities which the onlin e world offers on top of its 
recreational functions.  
3.3. Perceptions about the social impact of ICTs 
The majority of internet users has a positive perception about the impact of the internet on 
everyday life and in particular on their res ource-enhancing capabilit ies (learning, culture, 
health-related information and work). More than  half of users feel that the internet has 
improved their relationship with fa mily and friends while less than half says that the internet 
has added opportunities to meet new people or improved the way to deal with the public 
administration (Figure 6). As could be expected , higher actual use is correlated with positive 
opinions.  
Figure 6  
The impact of the Internet - % of users agreeing that the Internet has improved different aspects of 
their lives
87%74%70%67%66%57%51%51%50%48%44%
Your capability to be informed about current
issuesYour opportunity to learnYour opportunity to share views/access
cultureThe way you get health-related informationThe way you perform your jobYour relationships with family members and
friendsThe way you manage your financesThe way you pursue your hobbiesThe way you shopThe way you deal with public authoritiesYour opportunity to meet new people
 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society seen by the 
citizens (2008) 
Internet users also expr essed opinions on the cost s of non-internet usage.  The majority agreed 
that those who do not use the internet are le ss reachable for professional purposes, are at 
disadvantage during their career and risk  missing good online shopping opportunities. Non 
users, on the other hand, are more likely to repo rt that they feel less threatened by internet-
 
EN 40   EN related risks such as online fra ud and unintentional disclosure of personal data (Table 3). 
Interestingly, older Europeans are more lik ely to agree that non-users are missing 
opportunities than younger Europeans (with simila r social and cultur al characteristics), 
suggesting that older people are well awar e of the benefits of the internet.  
Most people, except for frequent users, disagr ee with the statement that non users miss the 
opportunity of socializing with fr iends and family. There is also  a general disagreement with 
the idea that non users are less open and less inform ed, but frequent users tend to disagree less 
than non users do. Non-users, on the other hand, reported significantly mo re often that they 
can avoid frustration caused by complicated tec hnologies, take less risk  and have more time 
for friends, family and for themselves.  
Nevertheless in all of these issues, in spite of the significant differe nces, both users and non 
users somehow similarly agreed or disagreed with the statemen ts proposed in the survey. In 
particular, both users and non users agree (even if  at different degrees)  on the fact that not 
using the internet means having fewer ch ances of finding good bargains and being 
disadvantaged in the work carrier. There is only one item where the opinions of Internet users 
and non-users diverged: the majority of Internet  users think that non-users take the risk of 
becoming old fashioned (Table 2). 
 
EN 41   EN Table 2: Perceived implications of not using the Internet (% of those who agree) 
Frequency of Internet use 
“People that don’t use the 
Internet” … No 
access No or 
less 
than 
once a 
month Once 
a day 
or 
once a 
week Several 
times a 
day N 
A. Miss the opportunity of 
greater contact with friends and 
family 42.1 35.1 43.7 53.5 11237 
B. Are at a disadvantage in their 
career prospects 57.1 56.2 60.7 64.5 14673 
C. Risk becoming old-fashioned 42.7 41.5 53.4 56.1 12671 
D. Miss the opportunity of 
finding good bargains online 
(including airline tickets and 
trips)  59.1 58.9 74.8 80.1 17603 
E. Are less open to the outside 
world 39.6 36.6 42.7 44.8 10484 
F. Know less and are not as well 
informed as other people 41.7 42.0 43.7 47.0 11196 
G. Have more time for 
themselves. family and friends 73.6 74.3 59.2 54.8 15778 
H. Take less risk because they 
don't get exposed to the risk of 
online fraud 77.2 76.0 68.9 62.9 17025 
I. Take less risk because they 
don't run the risk of other people 
finding out information about 
them 69.6 68.1 62.0 57.0 15253 
J. Are less reachable for 
professional purposes 63.2 59.0 65.7 70.1 15920 
K. Avoid the frustration of 
dealing with complicated 
technologies 57.1 55.3 55.6 53.2 13210 
Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society 
seen by the citizens (2008) 
With regards to the use of mob ile phones, considering that pe netration rates are roughly two 
times higher than for the internet, users were asked opinions about three main statements:  
• Mobile telephony enables better management  of leisure time, work and security; 
 
EN 42   EN • Mobile telephony leads to better or more cont acts with family members, friends and the 
outside world. 
• Mobile telephony results in mo re stress and higher costs. 
Frequent mobile users obviously tend to agr ee with the positive views. The young are less 
sensitive when it comes to stress and costs, but they do not appear to experience more contact 
benefits than older generations. The lower edu cated tend to be more enthusiastic about the 
positive effects of mobile phones, both in term s of time management and contacts. Negative 
perceptions about the impacts of the mobile phone, in particular in terms of costs and stress, 
are more likely among older i ndividuals and in rural regions , among people outside the labour 
market and those with low educational attainment.  
3.4. Conclusions 
The results reported in this chapter on the social  impact of ICT show that, contrary to previous 
predictions, internet use is positively associated with social capital. In general internet users 
are more likely to be active in social organi sations and are more ac tive in social leisure 
activities. They also exhibit higher levels of trust. 
Furthermore, the general perception of internet us ers is that the internet has a positive impact 
on their everyday life, especially in relation to th eir resource enhancing ca pabilities. They also 
think that non-users incur costs, for example re lated to fewer chances to find bargains and 
being disadvantage in their careers. Many of these opinions were sh ared by non-users. Non-
users emphasised worries over security and frustrat ion related to internet use, as well as the 
time they had for friends/family/themselves. 
This evidence suggests that there are strong social (and economic)  benefits to internet use and 
that, even in their own opini on, non-users are missing out on the chances offered by internet 
use. It also shows that non-users have certain fe ars related to the social  impact of ICT, which 
users do not share, suggesting that lack of familia rity with the internet may be an inhibiting 
factor. This confirms conclusions drawn in Ch apter 2 in relation to the need of raising 
awareness of the benefits and opportunities of internet use. 
 
EN 43   EN 4. THE INTERNET AS A COMMUNICATION TOOL  
Over the last five years the EU has witnesse d great progress in the expansion of internet 
access, broadband connectivity and uptake of in ternet services, primarily through fixed access 
lines and very recently through mobile networks . The rate of households with access to the 
internet through broadband increased to 80% in 2008, up from 33% in 2004, and the 
percentage of population that accessed the intern et on a frequent basis (every day or almost 
every day) increased from 23% to 43% over th e same period. European consumers are rapidly 
changing their habits and in creasingly adopting new ways of communicating, sharing 
information and interacting with business and pu blic administrations. Th is change is growing 
in parallel to the take-up of broadband conn ectivity, which is gradually offering higher 
download and upload speeds at cheaper prices. 
The percentage of the EU population using inte rnet services has grow n substantially since 
2005 (Figure 1). The largest increases have occu rred with respect to the proportion of the 
population using the internet for sending and receiving e-ma ils, as well as for finding 
information about goods and services, increas ing by 11 p.p., to 53% and 50% respectively, 
over the period up to 20 08. Government take-up has also gr own, with 28 and 68% of citizens 
and business using eGovernment services resp ectively. Other less popul ar services which 
require more advanced internet skills have also grown markedly, w ith the proportion of the 
population using these increas ing by between 6 and 10 p.p.. 
Figure 1 
Percentage of individuals doing specific online activities in the previous 3 months, EU27
0102030405060
2005 2008
Ordering goods or services, for private use Internet Banking Sending/receiving e-mails
Finding information about goods and services Reading/downloading online newspapers / magazines Telephoning over the internet , for videoconferencing 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
In order to measure the take-up of  advanced services in the EU, i.e. all those services that go 
beyond the one-to-one communicati on systems and make possible the distribution and sharing 
of online information, content a nd applications, be it on wire d or wireless networks, in 2008 
Eurostat dedicated a special module of th e survey on the use of ICT by households and 
individuals. The aim was to measure the us e of these services, looking at the use of 
information and entertainment serv ices, the use of mob ile internet and the willingness to pay 
for audiovisual content. Data from the modul e provide rich informa tion on the take up of 
advanced services by countries and by socio-demographic characteristics.  
 
EN 44   EN This chapter focuses on the results of the special module with regards to th e use of the internet 
for advanced communication services. Section 1 focuses on how Europeans use the internet to communicate. While use of internet to communicat e is growing, section 2 shows that internet 
does not yet replace other traditional means of  communication. Section 3 spreads light on the 
intensive use by the younger cohor ts of the population, while sect ion 4, on the use of mobile 
phones for advanced communication services, demonstrates that advanced mobile 
communications still have a long way to go before reaching similar take-up levels. 
4.1. How do Europeans use the internet to communicate? 
Communication is at the origin of the inte rnet and communication activities remain the 
primary action of internet user s. E-mail was the first mass adoption service in the history of 
the internet and is now widely seen as a trad itional means of communication; with 53% of the 
EU population in 2008 reporting they had used it within the last three months. 
Use of advanced communication services is also on the rise. According to Eurostat figures, in 
2008 35% of Europeans declared using the Internet in the last 3 months pr ior to the survey for 
advanced communication services, which include  creating or maintaining web logs, using 
instant messaging, posting messages to chat sites,  newsgroups or onlin e discussion forums, 
telephoning over the internet and vi deo calls and reading web logs. 
A key factor supporting both the more frequent  use of the internet and the take-up of 
advanced services is the continuing spread th roughout the EU of faster and cheaper broadband 
access. The data shows that there is a strong correlation between frequent internet use and 
rates of broadband penetration acr oss EU countries (Figure 2). 
Figure 2 
Daily Internet access and broadband penetration
R2 = 0.8
0%5%10%15%20%25%30%35%40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75%Percentage of individuals who accessed the Internet, on average, every day or almost every day in the last three months Broadband penetrationDK
HULV
PLLTIE
PTCZ
BGROELCYITESSIATMT
EUEEUK BE, DE FR
LUFISENL
SK
 
Source: Commission services based on Eurostat and COCOM data (2008) 
Adoption of advanced communicati on services is also correlated  with the level of broadband 
penetration, although the correlation is some what weaker (Figure 3). The main outlier 
countries include Germany and Malta, which exhibit relatively low use of advanced 
communication services compared to their rela tively high broadband pe netration level, and 
Poland, Hungary, Latvia and, as with frequent use, especially Slovakia, which feature a 
 
EN 45   EN relatively low level of broadband penetration despite having a high percentage of population 
using advanced services. 
Figure 3 
Regular use of internet for advanced communication services and broadband penetration
R2 = 0.4
0%5%10%15%20%25%30%35%40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60%
Use of internet for advanced communication servicesBroadband penetrationDK
HULV
PLLTIE
PTCZ
BG ROELCYITES
SIATMTDE
EUEEUK
BE
FRLUFI SENL
SK
 
Source: Commission services based on Eurostat and COCOM data 
One of the reasons behind the weaker level of correlation is the fact that the take-up of 
advanced communication services that do no t demand much bandwidth, like instant text 
messaging, is less dependant on the widespread availability of broadband. Spain, Estonia, 
Portugal and Poland are more inte nsive users of this service th an other countries with higher 
broadband penetration rates.  
Beyond broadband availability, other factors are al so critical to the understanding of the 
different levels of adoption of the internet for communication services . Users' awareness and 
skills, preferences and price of  traditional communication serv ices, or other socio-economic 
factors may help to explain these differences . Users may also decide to subscribe to a 
broadband service not for communication pur poses but primarily to get access to 
entertainment content and services.  
Sending and receiving e-mails is still the mo st popular communication service through the 
internet (Figure 1) : in 2008, 53% of surveyed individuals reported to ha ve sent or received an 
e-mail in the last three months. Within advanced services, instant messaging appears as the most attractive communication appl ication of the internet with 22% of EU citizens using it 
(Figure 4), followed by internet telephoning and video calls (16%) and posting of messages to 
news groups and online fora (16%),  along with reading blogs (15%). 
Predominance in the use of one or another se rvice is very much li nked to age. For younger 
people, e-mail is also a very dominant a pplication (78%) closely followed by instant 
messaging (59%). Posting of messages (44%) a nd reading blogs (35%) are the following most 
common services. Interestingly, te lephone over the internet and vi deo calls is not one of the 
most demanded uses by younger users, exactly th e opposite of what happe ns with people aged 
55 to 74, of which 7% seem to  find in internet te lephony and video calls the most interesting 
service.  
 
EN 46   EN Figure 4 
Use of the internet as a communication tool in the last 3 months
5%7%3%5%5%3%
22%16%16%15%12%10%4%
59%31%44%35%19%21%1%13%
0% 10% 20% 30% 40% 50% 60% 70%use of instant messaging (real-time
communication with other by typed text)telephoning over the internet and video callsposting messages to chat sites, message
boards or online discussion forumreading weblogs or blogstelephoning over the internetvideo calls (via webcam) over the internetcreating or maintaining own weblog or blog
Aged 55-74 All individuals Aged 16-24 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
4.2. Does the Internet replace oth er means of communications? 
Despite the significant growth in the use of th e internet for advanced communication services, 
such services do not yet reduce the use of ot her means of communications, such as e-mail, 
fixed and mobile calls (Figure 5). Results indicate that there is no real substitution effect and new communication services are used along with  the traditional ones, for which frequency 
and level of use may vary, but are still demanded.  
Figure 5 
Use of advanced communication services to replace traditional services
4%6%2%
4%
5%
3%
0% 1% 2% 3% 4% 5% 6%My internet calls replace my use of e-mail –
to some extentMy internet calls replace my use of e-mail –
very muchMy internet calls replace my use of fixed
telephone line (not linked to Internet) – to
some extentMy internet calls replace my use of fixed
telephone line (not linked to Internet) – very
muchMy internet calls replace mobile phone
calls – to some extentMy internet calls replace mobile phone
calls – very much
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
However, this conclusion only holds when  looking at the general population. When 
considering internet users who made  internet calls, evidence of th e substitution effect starts to 
emerge. For approximately one third of the pe ople using this servi ce, online calls have 
replaced the use of mobile or fixed line calls . For 27% of users, the replacement effect on 
 
EN 47   EN fixed line calls was even higher (F igure 6). Thus it appears that on ce one starts to use internet 
telephony, the uptake of traditional communicati on methods may decline. But since only 12% 
of the Europeans takes up the service, its total impact remains limited.  
Figure 6 
Substitution effect for users who made Internet calls
17,5%27,7%26,9%30,8%14,5%34,0%
0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4My internet calls replace my use of e-mail
– very muchMy internet calls replace my use of e-mail
– to some extentMy internet calls replace my use of fixed
telephone line (not linked to Internet) –
very muchMy internet calls replace my use of fixed
telephone line (not linked to Internet) – to
some extentMy internet calls replace mobile phone
calls - very muchMy internet calls replace mobile phone
calls - to some extent
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
One could also expect that the increase in the use of instant messaging and posting of 
messages would affect the uptake of e-mail servi ces. However the growth in the use of e-mail 
has been steady since 2004 (Table 1) and only 3% of individuals indicate that internet calls 
replace the use of e-mail. Some research poi nts to the shift by young users from e-mail 
applications to instant messaging services, alt hough preferences for a pa rticular service do not 
necessarily entail a significan t drop in other communication ch annels. Another reason for the 
growth in the use of e-mail is that, for many new Internet users, this application still appears 
easy to grasp relative to other interactive se rvices which require more advanced skills. 
Table 1  
 2004 2005 2006 2007 2008 
Percentage of individuals who used the internet for sending 
and receiving e-mails in the last three months 37% 42% 42% 48% 53% 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Similarly, the Internet can be used for maki ng calls and video calls and, depending on which 
application is used, at zero cost. However, the rate of substitution is not very high, suggesting 
that users are not yet abandoni ng traditional communications means. Only 2% of the 
population acknowledge an intensiv e replacement of mobile calls by internet calls, a figure 
that is also low (4%) in the case of fixed calls.  
Since most users of advanced communication serv ices rely on a fixed connection and only 3% 
of the EU population uses a third generation mo bile phone to access the In ternet, internet calls 
will not fully replace mobile calls in the near future, despite the fact that more and more 
mobile calls are also made from home or the work place, where fixed internet connections are 
available. In the case of fixed telephony, new pric ing models for fixed calls and the rise in the 
number of bundled broadband packages offeri ng free voice telephony as a free service on top 
 
EN 48   EN of the broadband connection may partly explai n why users do not feel the need to replace 
their fixed telephone line with in ternet communications services. 
Similar conclusions can be drawn in relation to entertainment services (Figure 7). There still 
remains a significant part of the population which refuses to adopt advanced information/entertainment services. On aver age, 3% of the populat ion download films and 
videos instead of buying/renting a DVD; 4% is lis tening to web radios instead of listening to 
normal radio and 6% prefers to download musi c files instead of buying music CDs. Similar 
percentages are observed with regards to the use of online contacts instead of personal 
contacts, with public services and administratio ns or the reading of online news instead of 
printed news, newspaper or magazines. These ra tes are particularly low for those aged 55-74. 
Figure 7 
Use of advanced  services to replace traditional services (2)
0%1%2%1%2%
3%4%5%6%8%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%I'm downloading films and videos instead
of buying/renting a DVD - very muchI'm listening to web radios instead of
listening to normal radio - very muchI'm using online contacts instead of
personal contacts with public services
and administrations - very muchI'm downloading music files instead of
buying a cd - very muchI'm reading online news instead of printed
news, newspapers or magazines - very
much 
55-74 All individuals 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
 
EN 49   EN 4.3. Youngsters are the most intensive internet users 
Young people are active users of the internet as the main channel for information and 
communication purposes (Figure 8).  
Figure 8 
Percentage of individuals by age group that have used Internet, in the last 3 months, 
for advanced communication services, EU27 (2008)
7%17%26%35% 35%51%73%
0%10%20%30%40%50%60%70%80%
65-74 55-64 45-54 35-44 TOTAL 25-34 16-24 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
"Digital natives", i.e. people between 16 and 34, and especially those aged 16 to 24, most of 
them students, stand out as the most regular, in tensive users of internet advanced services. 
There is an evident, profound break with previous  generations in the attitude towards the use 
of internet services. This is linked to the level of internet and informatics skills. The percentage of young people with medium internet skills is twice as much the European 
average (for all individuals aged 16-74) and the number of individuals aged 16 to 24 with IT 
skills obtained through formalis ed educational institution is  three times higher than the 
average (Table 2).  
Table 2 
 16-24 25-34 35-44 EU avg. 45-54 55-74 
Percentage of individuals who accessed the 
Internet, on average, every day or almost 
every day in the last 3 months (2008)  66 57 49 43 39 20 
Percentage of individuals who have 
obtained IT skills through formalised 
educational institution (school, college, university, etc.) (2007) 65 38 16 22 8 3 
Percentage of individuals who have carried 
out 3 or 4 of the Internet related activities 
(medium Internet skills) (2007)  43 33 24 23 17 8 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
 
EN 50   EN On average 43% of EU population accessed the Inte rnet everyday or almost every day (Figure 
9). However, this percentage increases more  than 20 p.p. when it comes to people aged 16-24, 
with 66% of them accessing the internet everyd ay. In the most advanced countries, around 
90% of young people connect on a daily basis. With the excepti on of Romania and Cyprus, in 
all countries the percentage of  young people connecting to the inte rnet everyday is higher than 
the average of the whole EU population. The difference between the whole EU population 
and the youngest users is about 23 p.p.. This differ ence lessens in the most advanced countries 
to about 18 p.p., but can be more than twice as much in the le ss advanced countries (Romania, 
Greece, Bulgaria, Portugal).  
It is also worth noting that differences betw een countries are reduced when the 16-24 age 
group is taken as a reference. Besides the mo st developed countries, young people in Latvia, 
Portugal or Poland have similar frequency of  use as in the UK, Germany or Belgium. 
Figure 9 
Percentage of individuals who accessed the Internet, on average, every day or almost every day in 
the last three months
0102030405060708090100
RO EL BG CY PT CZ PL ES IT MT LT IE SI LV EU27 HU SK EE FR AT BE DE UK LU FI NL SE DK NO IS0102030405060708090100
EU AVG 16-24 EU27 avg EU27 16-24 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
80% of students and 73% of the EU population aged  16-24 have used the internet in the last 3 
months for advanced communicatio n services (Figure 10). This is twice as much the amount 
of regular users in the employees and self employed category and 45 p.p. higher than the 35% 
of the EU population. In all other type s of services, both for communication and 
entertainment purposes, students and young pe ople always exceed other categories of 
population. Their attitude towards the web is different in that most of them are not passive 
consumers of web pages or static online cont ent pushed by a reduced number of content 
generators, but veritable users of a borderless space in which c ontent and services are made 
available for active users to download, exchange, cr eate and re-create, di stribute, share or re-
use.  
 
EN 51   EN Figure 10 
I have used Internet, in the last 3 months, for advanced communication services
0%10%20%30%40%50%60%70%80%90%
All persons
65-74All persons
55-74Retired and
other inactiveAll persons
55-64Persons aged
16-74 with no
or low
educationliving in thinly
populated
areasAll females
16-74Unemployed living in
intermediate
populated
areasAll individuals All males 16-
74Employee and
self-employed
(incl. family
worker)living in
densely
populated
areasStudent
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
This is confirmed by the shift in the focus from availability of online content to the significant 
rise of social networks and user created conten t in the last two years.  Young internet users are 
intensive consumers that fully exploit the many possibilities offered by the web.  
4.4. The mobile phone for advanced communica tion services: An emerging service 
Advanced services are mostly being used through fixed broadband connections and the role of 
mobile services is not yet tangible. Only 3%  of the EU population aged 16-74 uses a third 
generation mobile phone to a ccess the Internet. Interesti ngly, a heterogeneous group of 
countries are the top performers, with Nordic  countries along with Spain, Slovenia, Czech 
Republic, Slovakia and Portugal. Some countri es with good levels of fixed broadband 
penetration are amongst the laggards: Belgium and France for example have usage rates 
similar or below Bulgaria, Poland and Latvia (Figure 11).  
Figure 11 
Percentage of individuals who use a mobile phone via UMTS (3G) to access the Internet
0%1%2%3%4%5%6%7%8%9%10%
RO CY LT EL BE BG PL LV FR DE IE HU EE MT EU27 IT IS UK FI LU AT NL PT SK CZ SI DK ES NO SE 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
 
EN 52   EN These data refer exclusively to the use of th ird generation (3G) mobile phones to access the 
Internet. In many countries the use of 3G networks via USB dongles and datacards to get a 
broadband access for a laptop or a desktop is much higher28.  
Although 3G broadband access has a number of a dvantages over fixed broadband access - it 
can reach areas not covered by fixed broadband access, there is no need to pay a line rental 
and it provides access everywhere and connection is immediate, as  a USB key just needs to be 
connected to a computer - it appears that 3G is  not yet a full substitu te of fixed broadband 
technologies for private consumers, esp ecially in less dens ely populated areas.  
One reason for this lack of full substitutabili ty is that third generation mobile technology 
provides much lower access speeds than fixed broadband access. Enhanced 3G mobile technology, also called 3.5G, offers  much higher speeds, but c overage of 3.5G networks is 
limited to major cities with high population density
29. This compares to coverage rates of 
around 90% for DSL technologies in most countr ies. Outside areas with 3.5G coverage, only 
third generation coverage is available and in many cases this technology has to rely on low-
speed second generation mobile networks  to guarantee full national coverage.  
Another reason is the different price and usage conditions of mobile and fixed access, 
resulting in higher monthly cons umer prices for mobile servic es. Contrary to the pricing 
system of fixed broadband access, based on unlimite d consumption in excha nge of a flat rate 
in most EU countries, pre and post-payment are still predominan t pricing models for mobile 
phones. On average 41% of EU citizens subscribe to post-payment contracts and 35% to pre-paid packages. Only 4% of the EU population pa y a flat rate for internet access via the mobile 
phone in connection with post-payment schemes, but  this situation is expected to change in 
the future as more and more mobile operators start offering flat rate packages in an attempt to increase take-up of advanced serv ices as well as frequency of access
30. 
Mobile handsets have come a long way since the first models appeared on the market and 
their ergonomics and usability has improved sign ificantly, on top of being capable of many 
more functionalities. Despite these improvements, it is clear that for a nu mber of applications 
and services mobile handsets cannot compet e against laptop or desktop computers as 
performance is still better, both at  hardware and software level. It also appears that many sites 
and services are not yet fully ad apted for being browsed or used with a mobile handset. These 
factors altogether can explain the low adopti on of mobile handsets as a tool for using 
advanced internet services. However, sm artphones are developing quickly and several 
companies are strongly competing on the Mobile Operating Systems arena, which will certainly lead to an increase in the growth of mob ile applications. 
Sending photographs or video clips via MMS messages repres ent by far the most popular 
advanced services via a mob ile phone (Figure 12). When as ked, 18% of EU population said 
                                                
 
28 See the 14th Progress Report on the single European el ectronic communication market, available at 
http://ec.europa.eu/information_society/policy/ecomm/library/communications_reports/annualreports/14th/index_en.htm 
29 Around 60% of the overall population according to Screen Digest 
30 Eurostat data used in this report were collected in the first half of 2008. According to the OECD, data 
caps / bitcaps were applied to 36% of all broadband connections in the OECD in September 2008. The 
percentage was much higher for wireless broadband over satellite and fixed-wireless networks at 63%. 
Broadband plans over mobile networks were the most restrictive, with 89% of offers imposing a data 
limit each month. However, many ne w tariff plans for mobile services, including flat rates, have been 
made available since the second half of 2008. 
 
EN 53   EN they had sent a photo or a video clip in the last  three months, a figure th at rises to 40% in the 
case of young people. Internet  browsing and e-mail reading are the next most regular 
applications, but the level of adoption is much lower at 6 and 5% of the EU population, respectively. Use of these serv ices by younger generations follows the same patter, i.e. around 
twice as many the numbers of users. Use of other services (subscrip tion-paid information 
services, personal navigation, mobile payments  and TV and/or vide o watching) are still 
marginal activities. 
Figure 12 
I have used a mobile phone, in the last 3 months, to
1%1%2%3%3%5%6%18%
3%2%4%6%10%8%13%40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%download and/or watch TV or videopay for goods or services (instead of cash
or credit card)for personal navigation (e.g. for receiving
nearby travel, shopping, event
information)receive subscription-paid information
servicesupload photographs or video clips to
websitesread e-mailsbrowse the internetsend photographs or video clips
All individuals Aged 16-24 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Gradual adoption by the population of  mobile services is expected to increase mobile traffic at 
a much higher rate than fixed, though from a lower basis. However, according to recent 
literature, by 2020 consumers will still spen d much more time using fixed online data 
applications than mobile (Table 3)31.  
                                                 
31 Gartner's User survey analysis: Next-Generation Co mmunications Consum er, Worldwide, 2020 , 
February 2009 
 
EN 54   EN Table 3: Average hours per week using fi xed online and mobile data applications 
 Average Growth in 
average use by 
2020 
Fixed   
Internet blog 0.52 7% 
Photo blog 0.28 18% 
Video blog 0.34 36% 
Instant messaging 1.30 26% 
Chat rooms 0.50 15% 
Social communities 0.80 22% 
Fixed average 0.62 21% 
   
Mobile   
Mobile blog 0.09 61% 
Mobile photo blog 0.07 35% 
Mobile video blog 0.09 39% 
Mobile instant messaging 0.33 46% 
Mobile chat rooms 0.12 49% 
Mobile social communities 0.13 45% 
Mobile average 0.14 46% 
Total for fixed and mobile 0.69 23% 
Source: Gartner 
Provision of mobile content by mobile operators  was initially not very successful, mostly due 
to low quality services and bad pricing conditi ons. The spread of 3G networks, new pricing 
conditions including flat rates and the entry in to the mobile content market of handset 
manufacturers and of open distri bution platforms are expected to contribute to change the 
situation. At the moment, the very gradual de velopment of mobile broadband networks is 
enabling content companies that are leaders in the fixed segment to take the lead in the mobile 
broadband content arena, a situati on that is not likely to chan ge. The growing mobile content 
market is therefore becoming very si milar to the fixed broadband one.  
4.5. Conclusions 
Use of advanced communication services is on the rise. In 2008, 35% of Europeans declared 
having used the Internet  in the last three months for a dvanced communication services. The 
 
EN 55   EN continuing spread of faster and cheaper broa dband communications has been one important 
factor behind these results. Sending and receiving e-mails is still the most popular communication service through the internet. Pr edominance in the use of one or another 
service is however very much linked to age.  
There is an evident, profound break with previous  generations in the attitude towards the use 
of internet services. In the most advanced countries, around 90% of  young people connect on 
a daily basis. However, across all EU Member Stat es, use of advanced services is significantly 
higher among the young and the gap between countries for this age group is smaller. More frequent and advance use is linked to the higher le vel of internet and informatics skills of this 
generation, to a large extend ob tained though formalised educ ation. Their behaviour as 
regards the internet is also so mehow different from the rest of  the population: in particular, 
the young are more extensive users of advan ced internet services. 73% of them access 
advanced communication services. The next chapte r will look at further implications of such 
behaviour. 
As such, the young – and in particular students - can  be considered as le ad users of advanced 
internet services, showing the way for other groups in society. Th e phenomenon is a clear 
indication of the economic and social impact the internet will carry in the future and of the 
size of the change brought about by the digital revolution. It is also a positive indicator for 
future declines in the digital divide. Nevertheless , this does not mean that social differences in 
internet use will disappear and policy action shou ld continue to be taken to minimise these 
differences.  
 
EN 56   EN 5. THE USE OF THE INTERNET FOR ENTERTAINMENT PURPOSES AND ITS IMPACT ON 
CONTENT MARKETS  
The diffusion of broadband has brought about growth  in a variety of onlin e activities. Next to 
the online distribution of professionally-produced media content, such as music, films, video 
games and publishing content, 2008 has been charac terised by the explosion of social network 
services, notably Facebook (Annex: most viewed  websites) and Twitter, confirming the trend 
started a few years ago towards a more participative use of the web32. The diffusion of high 
capacity internet has also brought about a rise in the illegal di stribution of on line copyrighted 
material and, according to the content industry, leve ls of internet piracy are very high in some 
EU Member States. 
The previous chapter highlighted the emergence of a generation. These young users also stand 
out from the rest of the population in their att itude towards the payment of online content and 
the perception that many of the services and content are available on the internet free of 
charge or simply provided in exchange of a flat rate in ternet connection.  
This stylised fact is posing a number of cha llenges to policy makers , regulators and industry. 
In the context of the review of the EU regul atory framework for elect ronic communications, 
for example, the introduction of an amendm ent by the European Parliament in May 2009, 
after reaching an agreement, was motivated by th e treatment of file sharing over the internet. 
Decisions on key aspects of the telecoms re form were put on hold because of a question 
relating to internet use rather than  to traditional telecom aspects. 
While Europe is one of the mo st creative regions of the wo rld in terms of production of 
quality content and features high rates of broadband take up, it is yet to take full advantage of 
digital content markets, includ ing the advertising market whic h represents the biggest online 
content market in revenues followe d by online games, music and videos.33 Technological 
advances in ICT, together with the increasing internationalisation of audiovisual markets, are 
the two main challenges for policy-making in the audiovisual sector today.  
The regulatory framework has been reviewed to  respond to the increa sing importance of on-
line delivery of audiovisu al content. The Audiovisual Medi a Services Directive adopted in 
2007 sets European standards for the new services  so that national borders don't stand in the 
way of reaching viewers and users. It has to be implemented by Member States by the end of 
200934. In relation to support instruments the MEDIA 2007 programme seeks to ensure that 
the latest ICTs and trends are incorporated into the business practices of beneficiaries35. 
                                                 
32 In February 2009, for example, Nielsen estimated that memberships for micro-blogging service Twitter 
rose more than 1,300%. In the same month, Nielsen claimed that Facebook - already the largest online 
social network - saw growth of 228%. Source: Datamonitor "The Rise of Social Networking and Emerging Channels in Customer Service"- quoting research by Nielsen. 
33 OECD Information Technology Outlook 2008 
34 Available at http://ec.europa.eu/avpolicy/reg/avms/index_en.htm 
35 After exploring new ways of distributing European content through pilot projects, the Commission 
published a first call for proposals entirely dedicated to Video on demand three years ago: in the first year 11 VOD platforms with a majority of European content were supported for a total amount of € 4.2 
million. In response to this year's call 17 legal offe rs of shorts, documentaries and features films with a 
broader European coverage will r eceive around € 5.75 million.  
 
EN 57   EN Apart from challenges posed to audiovisual regulatory and support instruments the overall 
development of online distribution of creative cont ent in Europe, regardless of its origin needs 
to be addressed. The online distribution of creati ve works such as music, films, video games 
and publishing content is transforming the creativ e industries in Europe. Sales of content on 
packaged media are rapidly decreasing, but onl ine distribution does not yet compensate for 
these falling revenues, despite the high potentia l that clearly exists. De-materialisation of 
creative content distribution is sh aking up the business models of the creativ e industries, with 
both potential opportunities and potential losses and bringing new players into the media 
industries' landscape. 
By way of a response to these transformations, the European Commission launched the 
"Content Online in the Si ngle Market" initiative36. This initiative included the "Content 
Online Platform", a stakeholders' discussion and cooperation platform (creators, rights 
holders, content providers, consumer associa tions, internet service providers and the 
telecommunication industry)37. One of the main issues that  the Content Online Platform 
focused upon was improved availability of cr eative content through the establishment and 
development of new online business models.  
The Platform considered that in most cases, online offers are not ye t sustaining. Due to the 
"prototype" business model widely applicable to creative content in Europe, it is difficult to 
attract risk capital for new online business mode ls and it is difficult in the short term to 
finance the transition to digital distribution with the revenues of physical sales as these are 
shrinking for a number of types of content38. 
Established business models of the traditiona l media companies are based on sophisticated 
approaches to advertising and subscription models built upon the presumptions of both the ownership or control of intellectual property (i .e. content) and the ownership or control of 
expensive distribution networks (so that  the content can r each the audience). 
Consumers expect easy access and cross-platform availability, including across borders. Their 
willingness to pay for legal online offerings and to accept limitations to the availability of content is depending essentially on an accurate pricing, but also on how they can use legally 
acquired content, including copying  it. The – legal - availability  of creative content online is 
intrinsically tied to the issue of licensing, as creative content is only – legally - offered online 
when it is licensed accordingly. Discussions with in the Content Online Platform have shown 
that, in general, on the leve l of licensing and rights management, workable solutions 
responding to these challenges have yet to emerge. 
5.1. Willingness to pay for content  
Results from the 2008 survey rev eal that less than 5% of Europeans had paid for online 
content in the last 3 months. For the youngest age group (16-24), th is figures is twice as high. 
When looking at the individuals th at did not pay for online audiov isual content, half of them 
state that nothing would make them change their minds. For approximately 30% of them, 
lower prices would be an incentive to pay, while other improvements (wider choice or 
                                                
 
36 See: http://ec.europa.eu/avpolicy/other_actions/content_online/index_en.htm .  
37 The Final Report of the Content Online Platform was published on 12 May 2009: 
http://ec.europa.eu/avpolicy/docs/other_actions/col_platform_report.pdf 
38 This does not seem to apply to videogames, that were "born digital", nor to books whose physical sales 
remain stable and have even increased in some markets. 
 
EN 58   EN availability, enhanced quality, be tter payment methods, the right to  share material ) or the lack 
of freely available content would convince betw een 15 and 20%. Interestingly, the willingness 
to pay of youngsters and the general popul ation is very similar (Figure 1).  
Figure 1 
Paying for content (2008, %)
0 1 02 03 04 05 06 07 0The following would make me pay for online audiovisual content - Other motivation*The following would make me pay for online audiovisual content - More convenient payment
methods*The following would make me pay for online audiovisual content - Right to share legally protected
content*The following would make me pay for online audiovisual content - Lack of free available content*The following would make me pay for online audiovisual content - Better quality of paid content than
free services*The following would make me pay for online audiovisual content - Wider range of choices, content
more easily available*The following would make me pay for online audiovisual content - More advantageous prices
compared to offline content*The following would make me pay for online audiovisual content - Nothing, no willingness to pay*In the last 3 months, I didn't pay for online audiovisual contentIn the last 3 months, I paid for online audiovisual content
All individuals Aged 16-24 * % of individuals not having paid for online audiovisual content in the last 3 months 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
The limited willingness to pay in return for serv ice improvements suggests that the take up of 
advanced content services is linked to the perception that many of these services are free or are provided in exchange for a flat rate internet connection. Fo r many users, and especially the 
younger cohorts, adoption of advanced  services seems to be driven  by the principle of "eat as 
much as you can" in exchange of a fixed f ee. Once the connection to the internet is 
established, it is just a matter of streaming or downloading and copying the content of choice. 
Along with free applications – chats, intern et telephony and videoconferencing, open source 
applications and free content, web pages, radio and TV, blogs, user created content - a number 
of other applications and content services are available on the web and can either be legally 
purchased or illegally downloaded and shared for free.  
Moreover, the low percentage of individuals that consider the po ssible lack of freely available 
online content as a reason fo r paying, calls into question the argume nt put forward by 
representatives of the content industry that Eu ropean consumers will in the long term suffer 
from a lack of commercial availability of high quality content if the current model of 
audiovisual content dist ribution, based on illegal copying, is not curved. 
 
 
EN 59   EN Box 1: Digital content illegal exchange 
There are currently no official statistics on online piracy in the Internet. Peer-to-peer traffic 
gives an approximation on the size of the phenome non, as these protocols are mainly used to 
exchange files. Other sources are based on industry claims and surveys on usage. 
Industry39 claims that online music piracy accounts fo r 95% of the total di gital music market. 
The situation is not very different in the onlin e video market. It is es timated that worldwide 
only one out of five movie dow nloads is carried out legally40. 
Some evidences of illegal downloads in Euro pean Member States ar e provided by studies 
carried out for the industry that illustrate to a certain extent the current situation: 
• France : 13.7 million films were distributed on P2 P networks in May 2008, compared with 
12.2 million cinema tickets sold41. 
• Germany : P2P traffic was more prolific than a ll other internet traffic combined and 
represented nearly 70% of all traffic42. Over 45% of all files transferred on eDonkey2000 
were music files 
• Spain : There were an estimated 1.6 bill ion songs downloaded illegally in 200843, compared 
to 2 million legal "à-la-carte" downloads. This means that just 0.1% of total tracks 
downloaded in Spain was legal. Digital sales are flat at 10% of the market. 
The exchange of digital content is evolving dynamically over the Internet. Peer to peer (P2P) 
solutions are being improved and new platforms to store data are flourishing, making content 
more available than before. It is very difficu lt to measure the exchange of content over the 
Internet. A proxy measure is the ri se in visits to we bsites offering IP addr esses to content in 
P2P networks (sometimes without retribution to its creators, such  as The Pirate Bay) or stock 
websites (such as Megaupload). 
5.2. New content and new platforms fo r exchange: User Created Content 
Business models based on "user created content" can be established much more easily than 
professionally-produced content offers, simply because they carry lower development costs. The opportunities it represents are exploited more  by new entrants in the media industry, such 
as YouTube, than by "traditional" media distribution companies which are lagging behind.  
User Created Content refers to content made  publicly available through telecommunication 
networks, reflecting a certain amount of creat ive efforts and created outside professional 
routines and practices.
44 There are very few official figur es regarding the diffusion of User 
                                                 
39 IFPI (International Federation of the Phonographic Industry) Digital Music Report 2009: 
http://www.ifpi.org/cont ent/library/DMR2009.pdf 
40 NPD Group - IFPI Digital Music Report 2009 
41 Equancy and CO and Tera Consultants - IFPI Digital Music Report 2009 
42 Ipoque - IFPI Digital Music Report 2009 
43 Promusicae/Gfk: h ttp://www.promusicae.org 
44 Study on User-created content: Supporting a participative information society   
IDATE for the European Commision December 2008. 
 
EN 60   EN Created Content. The assessment of the magn itude of the phenomenon is based on usage 
statistics and user data from the main websites.  
User Created Content sites are mainly financed  through advertising and the vast majority of 
users are not remunerated. It is important to note that because of  the high costs of storage and 
delivery of this content, together with the uncer tainty of the associated business models (the 
share of advertising expenditure associated with user created content is less than 1.5% in 
Western Europe45), only large companies can nowadays afford to underwrite such sites. The 
most important platforms for User Created content are located in the North America46. These 
platforms are social networks lik e Youtube (specialised  in videos), MySpace (specialised in 
music) or flickr (specialised in photographs).  
With regards to the uploading of content, Esto nia is the leading Member State with 21% of 
citizens declaring to have uploa ded content in the last 3 mont hs. In Latvia, the Netherlands 
and the UK almost 20% of citizen s have declared to have done so. In the coun tries lagging 
behind (Czech Republic, Bulgaria, Greece and Sl ovakia) less than 5% of the population has 
declared to have uploaded content in the recent months (Figure 2). 
Figure 2 
I have used Internet, in the last 3 months, for uploading self-created content (text, images, photos, 
videos, music, etc.)
0%5%10%15%20%25%
CZ BG EL SK MT RO BE CY IT PT PL AT LT IE ES FI SI EU27 NO DK DE SE LU HU FR UK NL LV IS EE
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
5.3. The use of the internet for entertai nment purposes and to replace other 
means of communications: a cha llenge for the content industry 
Increased adoption of broadband with higher download and upload speeds is enabling the 
emergence of a multicast Web 2.0 model which st rongly differs from the traditional one-to-
many information/content model. This new pa radigm calls into question the traditional 
broadcasting and content industry business m odels in which profe ssional communicators and 
                                                 
45 Study on User-created content: Supporting a participative information society   
IDATE for the European Commision December 2008. 
46 According to the Alexa, the US were the leadin g country regarding MySpace (66.9% of the users), 
flickr (31.5% of the users) and You Tube (22.63% of the users).   
 
EN 61   EN content creators had the technical and financia l means to address a wide and rather passive 
audience. 
The newspaper industry, for inst ance, is struggling to survive amidst falling readership and 
advertising revenues, a trend set in motion by th e emergence of the new Internet services and 
exacerbated by the economic crisis. European newspapers have the advantage of much 
stronger balance sheets than their US counter parts, unencumbered by debt, but even so the 
combination of recession and structur al change is very challenging.47 Most publishers' 
websites do not make money and are subsidised out of print revenues. An increasing number 
of users get informed through pers onal web pages based on the RSS48 Technology (Figure 3), 
which allows receiving up-to-date information fr om other websites in a different number of 
formats; the number of blogs which can be labe lled as online ci tizen journalism are counted 
by millions. Also news sites that aggregate headlines from many different sources are 
increasingly being used by web users as the ma in source of daily information, a controversial 
trend from the publishers' viewpoint, conc erned for their copyrights and revenue 
opportunities. 
8% of EU citizens now read onl ine news instead of printed ma gazines and newspapers. This 
figure increases to 18% in the case of occasiona l online readers. The impact of the Web 2.0 in 
the written press is undeniable and may be  compounded by neighbouring developments such 
as the roll-out of ebook readers, intended to replace newsprint. 
Figure 3 
I have used Internet, in the last 3 months, for browser based news feeds (e.g. RSS) for reading new 
content on websites
0%5%10%15%20%25%30%35%40%45%
BG RO EL CZ MT CY PT BE DE IE LT IT AT NL LV HU PL EU27 LU EE SI SK IS UK DK SE ES FR FI NOEU avg. 16-24 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
The radio is another visible example. The rate  of replacement for radio is not very high yet 
(4%), but 11% of EU citizens do, on some occasi ons, listen to web radio instead of listening 
                                                 
47 See for instance, Andrew Currah, What's happening to our news: An investigation into the likely impact 
of the digital revolution on the economics of news publishing in the UK , Oxford University, Reuters 
Institute for Journalism, January 2009  
48 RSS means Really Simple Syndication: according to Wikipedia, a family of web feed formats used to 
publish frequently updated works—such as blog entries, news headlines, audio, and video—in a 
standardized format.  
 
EN 62   EN to the "normal" radio. While it is true that te levision and radio are also using the internet as a 
new distribution platform, the distinctive element in all cases is the notion that "pull content"
49 allows users to choose what to watch lis ten or read, when and where. 20% of EU 
citizens used the internet in the last 3 months , for listening to Web radios and/or watching 
Web television. 
Most of the content downloaded in Europe comes from the US, where the most used Internet 
services and online content shops are located. Most downloaded movies are produced in the 
US50.  
In terms of use, downloading of music is th e main activity performe d by Europeans in 2008 
(Figure 4), carried out by 24% of EU individu als and followed by listening to Web radios and 
/or watching Web television (20%). Movie dow nloading is also a ve ry common activity. 
Playing networked games with others (7%) a nd activities requiring uploading of information 
(images, photos, videos or music) (12%) are not yet as widespread as content downloading. 
Only 7% of respondents have declar ed to have used peer-to-peer.  
Figure 4 
Content - I have used Internet, in the last 3 months, for
30,6%28,4%27,6%23,7%20,0%17,8%11,6%7,2%7,1%6,5%
0% 5% 10% 15% 20% 25% 30% 35%downloading/listening to/watching/playing music, films and/or gamesdownloading/listening to/watching/exchanging/podcasting music and/or filmsdownloading/listening to/watching music and/or filmsdownloading and/or listening to music (other than via web radio)listening to Web radios and/or watching Web televisiondownloading and/or watching movies, short films or video files (other than via web
TV)uploading self-created content (text, images, photos, videos, music, etc.)playing networked games with otherspeer-to-peer file sharing for exchanging movies, music, video filesbrowser based news feeds (e.g. RSS) for reading new content on websites
 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
5.3.1.  Online music  
About a quarter of European citizens have downloaded and/or listened to music online in 
2008 (Figure 5), with large dispar ities between Member States. In the Netherlands or Norway, 
40% of citizens listen or downl oad music, and in 16 other countries over 20% do so. The 
difference with the laggards reache s up to 25 percentage points.  
                                                 
49 Consumers can either "pull" the information they demand at their own request or receive information 
that is "pushed" by content suppliers  
50 According to iTunes, 8 of the top 10 movie downloads through this online shop in May 2009 were US 
productions. 
 
EN 63   EN Figure 5 
I have used Internet, in the last 3 months, for downloading and/or listening to music (other than via 
web radio)
0%5%10%15%20%25%30%35%40%45%
IT CY RO CZ AT PT IE EL BG PL DE BE EE EU27 SI SK MT HU LV LT UK IS ES SE DK FI FR LU NO NL 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
According to industry reports, digital plat forms now account for around 20% of recorded 
music sales, up from 15% in 2007 (Figure 6). Th e digital music business in the world in 2008 
experienced a sixth year of expansion, grow ing by an estimated 25% to US$3.7 billion in 
trade value.  
Figure 6 
Global digital music revenues (2008)
00.511.522.533.54
2004 2005 2006 2007 2008Billions of dollars
0%5%10%15%20%25%
% of digital revenues 
US billions % digital in the Global musical revenues 
Source: IFPI, (International Federation of the Phonographic Industry) Digital Music Report 2009 
In Western Europe51 music downloads have grown by 76%. The industry is working to try to 
find successful and sustainable business mode ls in an environment dominated by free 
solutions. 2008 has been the year  where the bulk of business models has migrated from being 
                                                 
51 Screen Digest. Western Europe:  Austria, Belgium, Denmark, France, Finland, Germany, Ireland, Italy, 
Netherlands, Norway, Portugal, Spai n, Sweden, Switzer land and the UK 
 
EN 64   EN based on sales from downloads to being based on the access to  the music financed through 
advertisement52. These models are based on subscripti on fees or advertisement and/or are 
bundled with other services and devices (like Apple's iPhone). 
A related successful model in 2008 is digital music associated to videogames (for example 
Guitar Hero or Rock Band franchises): music games were responsible for 15% of all games 
sales in the first half of 2008 and for 22% of  the year-on-year grow th of the videogames 
sector.53 
5.3.2.  Online video 
Less than 20% of European citizens used the in ternet for online video in 2008. This includes 
both short video clips like the ones available on You Tube as  well as video streaming and 
downloading. There are again sign ificant differences between Member States: In Latvia or the 
Netherlands almost 30% of citizens regularly download and watch movies, and this figure is 
higher than 20% in 10 other countries. The di fference with the laggards reaches up to 20 
percentage points.  
Figure 7 
I have used Internet, in the last 3 months, for downloading and/or watching movies, short films or 
video files (other than via web TV)
0%5%10%15%20%25%30%35%
IE IT AT CY BE EL RO PT CZ FI MT PL BG EU27 UK HU NO SK SE FR EE DE DK SI ES LU LT IS NL LV 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Business models providing free video content,  financed through advertisement, dominate 
video consumption as the PC remains the mo st used device for video through the Web.. The 
YouTube website is the most popular access to  video streaming (Tab le 1), although video 
streaming websites are not yet profitable54. 
                                                 
52 With the success of websites like Spotify   
53 NPD Group - IFPI Digital Music Report 2009 
54 According to Google's financial statements, Youtube has 1.65 million $ of daily losses.  
 
EN 65   EN Table 1: Number of videos viewed from the top three sites  
June 2008 (excl. ad-networks55) 
UK FRANCE GERMANY USA 
YouTube 
(1.4 billion) YouTube 
(0.5 billion)  YouTube 
(1 billion)  YouTube 
(4.2 billion)  
BBC 
(45 million) DailyMotion 
(0.3 billion)  ProSieben 
(40million)  MySpace 
(0.5 billion)  
MSN 
(22 million) TF1 
(37 million)  RTL 
(32 million)  Yahoo 
(0.3 billion)  
   Source: Screen Digest 2009 
The paid market for online video has not yet proved a sustainable model overall, because of 
high bandwidth storage and de livering costs together w ith low paid consumption. 
Unprofitability has led to the closing of severa l online stores in 2008. iTunes remains the most 
successful store, managing content over revenue-g enerating platforms such as the iPod digital 
media players as well as the iPhone.  
Against this background the video-on-demand s ector is still growing and several business 
models are being tested by different pr oviders in almost all Member States56. 256 services 
were available in November 2008 through a variet y of platforms: Internet (168 services), 
IPTV (74 services), cable (23 services), satell ite (12 services) and Digital Terrestrial TV (1 
service). Business models range  from free to subscription serv ices, from rental to download-
to-own and services linked to the ownership of dedicated players, etc. However, rental access 
to individual services remains the most used m odel. Most of the services are restricted to 
users resident in certain countries; only a mi nority is open to a supra national audience. 
France is the country where VoD se rvices are most developed.  
Video on demand is considered by many as a comp etitor or a substitute for the rental or sale 
of DVDs. Recent evidence from some of the mo st developed markets shows however that the 
revenues generated from VoD services (mainl y through the IPTV mode) remain modest and 
are unable to compensate for the decline in re venues from the sales and renting of DVDs. In 
France57, in 2008 revenues from DVDs totalled a lmost € 850 million (- € 88 million vs. 2007) 
while VoD (mainly through IPTV services) to talled € 53 million (+ € 24 million vs. 2007). 
The same patterns were recorded in the UK58, where falling DVD revenues (- € 64 million vs. 
2007) were not compensated for by surging of VoD revenues (+ € 27 million vs. 2007). 
                                                 
55 An ad – network is a company that connects web s ites that want to host advertisements, for instance 
video advertisement, with advertisers. 
56 European Audiovisual Observatory, 2008 Yearbook 
57 CNC, Bilan 2008 
58 UK Film Council, 2009 Statistical Yearbook 
 
EN 66   EN 5.3.3.  Videogames  
Around 7% of Europeans have used the intern et (in the last three months) for playing 
networked games. About 10% have done so in Denmark, Hungary, Latvia, Finland and 
Norway, while less than 4% have followed in Italy (Figure 8).  
Figure 8 
I have used Internet, in the last 3 months, for  for playing networked games with others
0%2%4%6%8%10%12%14%16%
IT IE CY RO EE EL AT CZ FR ES PT EU27 DE BE BG UK NL MT SI IS SK PL LT LU SE NO FI LV HU DK 
Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  
Out of the main online content markets, the videogame segment has featured the highest 
growth rates over the last 3 years, driven by th e introduction of generatio ns of game consoles 
enabled for Internet surfing. Video Games are increasingly segmenting and furthering 
audiences reaching beyond hardcore gamers. In the last years, companies like Nintendo have 
launched videogames targeting adult population attracted by technical aspects such as 
graphics and sound effects. 
Global revenues for the video games industr y account to 48.3$ billion in 2008 and are 
projected to grow to 68.3$ b illion by 2012. The online video game  market is expected to 
double between 2008 and 2012. Other software segments  will continue to grow but at a lower 
rate.59 
Sources of growth are new models of online gaming and mobile gaming. Vivendi's World of 
Warcraft is a European success story and its su bsidiary Activission Blizzard is the world's 
number one developer of videogames when  only software is taken into account. 
The use of mobile terminals for gaming has increas ed, in the last year, due to the development 
of mobile broadband flat rates and casual gami ng platforms such as AppStore. Casual gaming 
represents a major revolution in  the videogame industry and e xpands its consumer base. The 
casual games sector drives a third of the indus try's total revenues and is expected to account 
for half of it by 201260. 
                                                 
59 IDATE Communications and Strategies, New Challenges for the video game industry, 1st Quarter 2009 
60 IDATE Communications and Strategies, New Challenges for the video game industry, 1st Quarter 2009 
 
EN 67   EN 5.4. Conclusions  
The diffusion of broadband has brought about ra pid growth in the distribution of online 
content, legal as well as illegal. While young users are at the forefront in the use of the internet for content and entertainment activities, they also stand out from the rest of the population in their attitude towards the paym ent of online content; they are generally 
unwilling to pay for many of the services, excep t those providing some additional added value 
over and above that provided by those services they can obtain for free. 
This stylised fact is posing a number of cha llenges to policy makers , regulators and industry. 
While Europe is one of the mo st creative regions of the wo rld in terms of production of 
quality content and features high rates of broa dband take up, it is not yet taking full advantage 
of digital content markets. American content an d online shops have to a large extent cornered 
the market, raising revenues through online adve rtising, and experiencing success stories such 
as Appstore. 
For Europe to successfully co mpete in the market for conten t, solutions to these problems 
need to be found; through finding innovative a nd sustainable business models as well as a 
favourable regulatory environment. 
 
EN 68   EN Annex: Most Viewed websites 
Top 5 Internet sites per country may 200961 
Most visited 
websites per 
country May 2009 1 2 3 4 5
Belgium Google.be Facebook.com Windows Live YouTube.com Skyrock
Bulgaria Google.bg Vbox7.com Google.com Zamunda.net Abv.bg
Czech Republic Seznam.cz Lide.cz YouTube.com Szn.cz Google.com
Denmark Google p å dansk Facebook.com YouTube.com Google.com Windows Live
Germany Google.de Google.com YouTube.com Ebay Wikipedia
Estonia Google.ee YouTube.com Google.com NETI Delfi
Greece Google.gr Facebook.com YouTube.com Google.com Yahoo!
Spain Google.es Windows Live YouTube.com Google.com Facebook.com
France Google.fr Skyrock Facebook.com Windows Live YouTube.com
Ireland Google.ie Google YouTube.com Yahoo! www.bebo.com
Italy Google.it Facebook.com YouTube.com Windows Live Yahoo!
Cyprus Google.com YouTube.com Facebook.com Windows Live Yahoo!
Latvia Google.lv Draugiem.lv Inbokss One Delfi
Lithuania Google.lt one.lt Google.com YouTube.com Delfi
Luxembourg Google.lu YouTube.com Facebook.com Google.com Windows Live
Hungary Google.co.hu Iwiw.hu YouTube.com Google.com Origo Freemail
Malta Google.com.mt Google.com YouTube.com Facebook.com Windows Live
Netherlands Google.nl Hyves.nl  Windows Live YouTube.com Google.com
Austria Google.at Google.com YouTube.com Facebook.com ORF ON
Poland Google.pl Nasza-klasa.pl Onet.pl Allegro Wirtualna Polska
Portugal Google.pt hi5 Windows Live YouTube.com Sapo - Portugal Online!
Romania Google.ro Yahoo! YouTube.com hi5 Google.com
Slovenia Google.si Google.com Facebook.com YouTube.com 24 ur - Naslovnica
Slovakia Google.sk Azet.sk YouTube.com Zoznam.sk Google.com
Finland Google.fi YouTube.com Google.com Facebook.com IRC-galleria
Sweden Google.se YouTube.com Google.com Facebook.com Windows Live
United Kingdom Google.co.uk Facebook.com Google.com YouTube.com Yahoo!
United States Google.com Yahoo! Facebook.com YouTube.com Myspace
Japan Yahoo.co.jp FC2 Google 日本 YouTube.com 楽天 rakuten
China Baidu.com QQ.COMsina
Google.com 淘宝网  taobao  
The most viewed sites on the Internet in EU-27 are:  
• Search services such as Google and Yahoo  
• Social networks such as facebook  
• Video services like Youtube  
• Collaborative/Web 2.0 websites like Wikipedia  
                                                 
61 www.alexa.com 
 
EN 69   EN It is interesting to note that most viewed webs ites in Europe are almost the same as in the US 
and Japan (dominated by American companies) while in China, the top three websites are 
Chinese.  
Google websites are the most viewed in 26 of th e 27 member States, showing that search is 
the top activity on the web and th erefore advertisement in this category is one of the main 
sources of revenues in the industry. The other two main categories in the Internet are online 
free video and social networking. The only countr y where the most viewed website in Europe 
is not owned by Google is the Czech Republic with www.seznam.cz  (a local web dedicated to 
search, email services, news and w eather forecasts among other services).  
Global top 10 websites (in terms of traffic) and their users 
Users of the 10 most visited websites
0%10%20%30%40%50%60%70%80%90%100%
Google Yahoo! YouTube Facebook Windows Live MSN Wikipedia Blogger Baidu MyspaceUSA Rest of world 
Source: Alexa.com, 13.05.2009  
 
EN 70   EN 6. ICT  UPTAKE BY EUROPEAN BUSINESSES AND PRODUCTIVITY IMPACTS  
Economic theory attributes an important role to th e ICT take up of businesses for increased 
efficiency, innovation and growth. Therefore, th e take up of ICT by European businesses is 
crucial for the raising of Europe's productivity potential and future growth prospects. This 
chapter looks at recent progress made in the take up of ICT by European businesses and recalls the importance thereof for the economy.  The next section, section 6.1, provides an 
overview of recent trends in th e take up ICT by EU businesses. Section 6.2 looks at the status 
of supply chain management. Finally, section 6.3 reviews the theory and evidence on the 
economic importance of ICT. 
6.1. Developments in ICT uptake by EU businesses 
Developments in ICT uptake by EU busine sses over the period 2005 and 2008 show a mixed 
picture. In some areas significant progress ha s been made. For example, connectivity has 
increased strongly, with the percentage of  enterprises having a broadband connection 
climbing from 62% in 2005 to over 81% in 2008 (F igure 1). Progress has also been made in 
the area of e-Banking, with use rising from  70% to 78% over this period. Significant 
improvement in the uptake of online public servi ces has also taken place, with half of EU 
enterprises using the internet for sending fille d forms to the public administrations in 2008, 
compared to 33% in 2005. This steep increase re flects efforts made by the public sector with 
regard to electronic public services, as public services are increasingly becoming available 
online. 
Less progress, on the other hand, has been made in the area of electroni c transactions. Only 
12% of total enterprise turnover is made online,  an improvement of only 2 p.p. with respect to 
2005. Therefore, while connectivity is now high, the actual implementati on of use of ICT in 
business processes, especially those involving relations with cu stomers and suppliers, remains 
limited. 
Figure 1 
ICT use by enterprises (EU average, in 2008)
10%12%24%33%61%70%62%
12%16%28%50%64%78%81%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%e-Commerce - weight of online turnoverSelling onlineBuying onlineeGovernment (sending filled forms)Having a websitee-BankingAccess to broadband
2005 2008
 
Source: Eurostat, Survey on ICT in enterprises (10+ employees, excluding the financial sector)  
 
EN 71   EN Additional evidence on e-commerce take-up available from statistics on website 
functionalities (which does not  account for enterprises sell ing online through external 
providers) shows that while having a webpage is quite common among EU businesses (64% 
penetration in 2008), availability of services through the internet  is limited and this applies 
especially to those offering a high value adde d to customers. In particular, while 57% of 
websites contain product catalogu es and/or price lists, 26% al low for online ordering/booking 
and a mere 10% for payment (Figure 2). Inte ractive customisation of content and the 
possibility to design products tend not to be wi despread either and limited to slightly more 
than 10% of websites. Finall y, roughly one fourth of webs ite shows advertisement of 
available jobs.  
There are, however, large differences across industries, reflecting their activities. For 
example, the percentage of websites having an  ordering/booking functiona lity is equal to 75% 
in the hotel industry and goes down to 33% and 19% in the tr ade and manufacturing sectors. 
The possibility to personalise content is relatively high in financial services websites (28%) and quite uncommon in the manufacturing sector (8%). 
Figure 2 
Availability of websites with specific functionalities
 (EU average, in 2008)
26%26%
13%
11%10%57%
0%10%20%30%40%50%60%
Product catalogues or price
listsAdvertisement of available
jobs or online job
applicationsOnline ordering, reservation
or bookingPossibility for visitors to
customise or design
productsPersonalised content in the
website Online payment 
Source: Eurostat, Survey on ICT in enterprises (10+ employees). 100 = enterprises having a website.  
Furthermore, statistics on the take-up of a dvanced solutions aimed at supporting enterprises 
business processes reveal the following (Figure 3):  
Use of ICT for the automation of internal bus iness processes through th e automatic exchange 
of information and for the management of human resources is quite common, especially 
among large enterprises.  
eBusiness applications enabling the automatic link with business part ners, including those 
automating the supply chain and the transmission of invoices, are still used by a minority of 
EU enterprises. In fact, when ICT is used for integration with customers and suppliers a wide 
range of issues ranging from technical, busin ess and legal ones have to be dealt with, 
increasing the complexity of the exercise.  
 
EN 72   EN Firm size is still an important factor when l ooking at uptake. Use of advanced applications 
tends to require heavy investments, strong ICT and eBusiness skills for which economies of 
scale matter.  
Figure 3 
Use of eBusiness applications (EU average, in 2008)
43%27%32%70%37%
11%9%15%40%17%
0% 10% 20% 30% 40% 50% 60% 70% 80%Human resources applicationSending of e-invoicesSupply chain automationAutomatic linking of internal processesAnalytical CRM
Large SMEs
 
Source: Eurostat, Survey on ICT in  enterprises (10+ employees).  
6.2. Supply chain management 
Supply chain management is one of the areas in  which ICT can bring strong benefits in terms 
of efficiency gains. Nevertheless, evidence show s that penetration of applications for supply 
chain automation is still rela tively low throughout the economy (Figure 4). In wholesale and 
retail trade, e.g. the industries in which these applications are most heavily used in relative 
terms, the electronic share of in formation with suppliers is limited to 16% of businesses. In 
addition, only 10% of businesse s in manufacturing industries ar e using ICT for integrating 
vertically along the supply chain. Companies d ealing with postal services, transportation, 
logistics and telecommunications (transpor t and communication sectors) show higher 
propensities to the use of appl ications enabling the automatic detection of the status of 
delivery, though even here they are s till quite small in absolute terms. 
The size of enterprises is an important factor to take into account: use of e-supply chain 
management in large enterprises is about twice as much as th at of SMEs. According to the 
"hub and spoke model"62, large enterprises tend to be connected with their business partners, 
often SMEs, through common networ ks in which they represent th e centre. Accord ing to this 
model, large enterprises have sufficient ba rgaining power to impose common business and 
technical standards to their partners63 and often cover a share of the fixed investment needed 
to build up the network. Conversely, in supply chain markets where transactions take place 
among small enterprises, no actor can set a comm on standard and afford  building the network 
architecture with a negative impact on the take up of solutions for process automation. Data 
                                                 
62 The model describes a value chain where a large enterprise (the hub) is dealing with several SMEs 
(spokes).  
63 This is the case, in particular, of large manufactures and retailers. 
 
EN 73   EN weighted by enterprise size reveal that the im pact of eBusiness solu tions like supply chain 
management is larger than that suggested by un-weighted data: while 15% of enterprises are 
exchanging information with suppliers and/or  customers electronically, these enterprises 
represent 30% of the economy in terms of persons employed.  
Figure 4 
Electronic share of information along the supply chain (EU 2008)
0%2%4%6%8%10%12%14%16%18%
with suppliers on inventories,
production plans or demand
forecastswith suppliers on progress of
deliverieswith customers on inventories,
production plans or demand
forecastswith customers on progress of
deliveriesWhole economy Manufacturing Construction Trade Transport Communication
 
Source: Eurostat, Survey on ICT in  enterprises (10+ employees).  
ICT is expected to provide fu rther benefits to bu sinesses through the diffu sion of more recent 
technologies which are being increasingly depl oyed in the economy. In particular, RFID64 
applications are already used by a number of enterprises (Figure 5). This finding confirms 
RFID usage in logistics and freight transp ortation – from vehicle tracking to warehouse 
processes optimisation and reusab le assets tracking – but also in passenger transportation, due 
to the increasing deployment of RFID in cont act less smart cards for payments. Take-up is 
also high in retail trade (27%) and in manufacturing (25%). The reason behind these results is 
that process manufacturers are facing increased pressure from  their retail customers, in 
tagging pallets or cases with RF ID in order to improve supply chain processes. Finally take-
up in hospitals is more limited (18%). In addition, the majority  of respondents indicates that 
RFID is used for inventory management (enter prises comprising 70% of the workforce) while 
nearly half of the respondents showed usage or intended use of RF ID for labelling single 
product items (47% of the workforce). Othe r key application ar eas include person 
identification, production tracking and container or pallet tracki ng (Figure 6). This evidence 
suggests that benefits from RFID  can be expected in the area of the supply ch ain, including 
logistics, transportation and inventory optimization. 
                                                 
64 Radio Frequency Identification  
 
EN 74   EN Figure 5 
Use of RFID applications in 2007 in selected sectors and EU MS
Enterprises comprising % of the workforce
5
2456
13 31424
20
10
0510152025
Manufacturing Retail trade Transport services Hospital activities
implementing RFID  piloting RFID using RFID in their regular business
 
Source: eBusiness Watch 2007. The survey had a scope of 434 interviews conducted in 7 EU countries (France, 
Germany, Ireland, Italy, Poland, Spain and the UK) in September 2007. 
Figure 6 
RFID application areas (in % of RFID using companies)
Enterprises comprising % of the workforce
4270
413947
01020304050607080
person identification, for
example for access control,
location finding or trackinginventory management tracking products through
manufacturing, assembly or
other processescontainer and pallet tracking labelling of single product items
 
Source: eBusiness Watch 2007. The survey had a scope of 434 interviews ("total"), conducted in 7 EU countries 
(France, Germany, Ireland, Italy, Poland , Spain and the UK) in September 2007 
ICT benefits for businesses are normally expected  to materialise through processes efficiency, 
innovation and market potential. Evidence shows that  enterprises perceive ICT more as a tool 
for boosting productivity and reducing costs, rath er than an instrument for increasing the 
number of reachable customers and the related tu rnover of the enterprises (Figure 7). This is 
consistent with findings on IC T take-up (Figure 3) which show  that applications aiming at 
increasing the enterprise internal efficiency are more widespread with respect to those 
enabling e-commerce. Similarly, only a minority of businesses consider ICT an enabler for the rollout of new products/serv ices. Finally, large enterprises tend to be more positive when 
assessing the impact of ICT with respect to SMEs. 
 
EN 75   EN Figure 7 
Perceived relevant benefits of ICT deployment (EU, in 2008)
% of enterprises for which the listed benefits are relevant
6%8%11%20%
15%15%18%41%
8%10%15%27%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%Higher earningsDevelopment of new products and servicesRelease of resourcesReorganisation and simplification of work
routines
All Large SMEs 
Source: Eurostat, Survey on ICT in  enterprises (10+ employees).  
Additional evidence on ICT impacts comes from the analysis based on empirical observation 
at enterprise level. A pilot Eurostat project covering some EU Member States65 has come up 
with some initial evidence on the positive role  of broadband connectivity on productivity, 
even if results are not fully consistent across countries and economic sectors. This seems also 
to confirm that the impact of  ICT on productivity is not simply  a matter of how much ICT a 
firm has, but also how ICT is us ed. In this respect, availability of ICT and eBusin ess skills is a 
crucial factor. 
6.3. The economic impact of ICT: theory and evidence 
6.3.1.  The impact of ICT on pr oductivity and growth 
In the context of the current economic and financial crisis, it is important to remember the 
central role played by the production and take up of ICT in driving innovation, productivity 
and growth66. Firstly, ICT-producing industries contribut e directly to produc tivity and growth 
through their own rapid technolog ical progress; secondly, ICT use improves the productivity 
of other factors of production (or inputs); and th irdly, there are 'spillover effects' on the rest of 
the economy as ICT diffusion leads to innovation and efficiency gains in other sectors. 
The development of the EUKLEMS database, supported by the 6th Framework Programme, 
has allowed a direct comparison of the divergen t productivity experiences of the US and the 
EU and the identification of th e contribution of ICT to such divergence. Labour productivity 
growth in the US accelerated from 1.2% in the period 1973-1995 to 2.3% in 1995-2006. 
Conversely, the 15 EU count ries that consti tuted the Union until 2004 experienced a 
productivity growth slowdown between these tw o periods (from 2.4% to 1.5%). Most of the 
                                                 
65 DE, FR, IT UK, NL, SE, CZ, IE, AT  
66 A detailed analysis of the issue was produced in the i2010 HLG note "The economic impact of ICT: 
evidence and questions" (2006), available at  
 http://ec.europa.eu/information_society/eeurope/i2010/docs/high_level_group/note_on_economic_impa
ct_of_ict.pdf 
 
EN 76   EN economic literature attributes these divergen t trends to the slower emergence of the 
knowledge economy in Europe as opposed to the US.67 The bulk of the EU productivity 
downturn is widely believed to stem from an out dated and inflexible industrial structure: with 
an excessive focus on low-medium technology indus tries, slow to adjust  to the pressures of 
globalisation and of rapid techno logical change. This resistance to change contributed to the 
slow adoption of ICT and their integrati on into the business process in Europe. 
In the mid-90s, the US experienced a productiv ity boost due to higher productivity originating 
from ICT-producing industries, as well as from a capital deepening effect due to investment in 
ICT assets throughout the economy. These change s were driven by the rapid pace of 
innovation in ICT, fuelled by the continuing fall in semiconductor prices. By contrast, the EU 
experienced lower productivity and growth cont ributions from investment in ICT and from 
ICT-producing industries (due to a smaller shar e of the ICT industry). However, the largest 
difference between the EU and the US, and for that matter between EU countries themselves, 
was due to the contribution of the overall effi ciency of the production process. "Multifactor 
productivity growth" (which measures the joint influences on economic growth of 
technological change, efficiency improvements, re turns to scale and othe r factors) accelerated 
from 0.5% to 1.4% in the US, while in the EU it fell from 0.9% to 0.3% . In particular, the US 
experienced more rapid productivit y growth in market services, such as trade, finance and 
business services, than the EU. 
Therefore, for Europe to increas e its productivity potenti al, and benefit from ICT, it needs to 
find mechanisms to exploit service innovations fo r greater efficiency gains, and a new model 
of innovation and technological change, w ith greater emphasis on human capital, 
organisational change and other intangible inve stments, to make use of its own innovative 
capabilities. Further, a more flexible approach towards lab our, product and capital markets 
would allow resources to flow to their most pr oductive uses; structural reforms in the context 
of the renewed Lisbon agenda are already delivering on these aspects. Finally, the 
achievement of a truly single market is important in order to exploit competition benefits as well as economies of scale. 
6.3.2.  The impact of ICT on employment 
There is wide consensus that ICT take-up, meaning business expenditure in hardware, 
software and electronic communications tends to translate into productivity growth both through a direct effect, due to the increase in the capital per worker ratio, and indirectly, 
thanks to efficiency improvements. 
At the same time, in the political debate on the ICT impact on employment, one line of 
reasoning, which finds an echo in  the general audience,  stresses that techni cal progress allows 
firms to produce the same output with less input  – and especially less labour – leading to 
“technological unemployment.” This opinion, base d on the assumption that the output of 
economies remains fixed over time, does not fi nd support neither in economic history nor 
from a theoretical point of view and most of all it is contradicted by hundreds of years of 
economic history.  
                                                
 
67 B. Van Ark, O'Mahony M. and Timmer M.P. (2008), "The productivity gap between Europe and the 
United States: Trends and causes", Journal of Economic Perspectives, vol. 22, No 1, pp 25-44. 
 
EN 77   EN The recent Commission study (2008): "The  Impact of ICT in employment"68, clearly indicates 
that according to economic theory the long te rm impact of ICT diffusion on employment is 
likely to be negligible or even positive while a negative effect can be  expected only in the 
very short run. In addition, the ICT effect on employment will depe nd on the specific features 
of the industry and the country considered, including the labour  market legislation. Empirical 
evidence based on analysis of data at industry le vel in EU Member States, US and Japan69 is 
in line with the th eoretical considerations and does not support the hypothesis of a systematic 
positive or negative effect of ICT on employment  in the long run. Econometric estimates of 
ICT impacts across countries and industries are hi ghly dispersed around a small negative 
number and in most cases st atistically not significant70. 
Hence, there is no evidence that ICT system atically influences the levels of overall 
employment across all countries  and sectors. Rather, this impact will depend on the 
particularities of the country or sector, including the supply of labour. 
6.4. Conclusions 
ICT take-up by European businesses over th e period 2005 and 2008 shows a mixed picture. 
Significant progress has been made  in connectivity, eBanking and the uptake of online public 
services, reflecting efforts made by the public sect or with regard to electronic public services. 
Less progress has been made in the area of e-commerce.  
Evidence on the take-up of advanced solutions aimed at supporting enterprises' business 
processes shows that use of ICT for the automa tion of internal business processes through the 
automatic exchange of information and for th e management of human resources is quite 
common, especially among large enterprises. But eBusiness applic ations enabling the 
automatic link with business partners, includi ng those automating the supply chain and the 
transmission of invoices, are still us ed by a minority of EU enterprises. 
A weak take-up of ICT solution which enhances e fficiency standards, in particular by SMEs, 
raises concerns in terms of productivity impacts.  Policy efforts in term s of awareness raising 
and facilitating access to ICT solutions should be  intensified, while the spread of wireless 
solutions is a clear promise for future productivity gains.  
                                                 
68 Available at:  
 http://preprod.europa.infso.cec.eu.int/information_ society/eeurope/i2010/docs/benc hmarking/impact_of_ict_on_em
ployment.pdf  
69 Data available within the EU KLEMS project.  
70 ICT is measured as the ratio between ICT investme nts and output (ICT/Y). A coefficient of one means 
that, by increasing ICT/T by 1%, employment would increase by 1% too. 
 
EN 78   EN 7. DEVELOPMENTS IN NATIONAL ICT  POLICIES71 
One of the major successes of i2010 is that it ha s lead to the mainstreaming of ICT policies. 
Member States have increasi ngly recognised the importance of ICT for productivity and 
growth throughout the economy and the potential it has for enabling the achievement of a 
broad variety of socio-economic objectives. As su ch they have integrated policies on ICT in 
to many other policies and more and more Member  States have formulated integrated national 
ICT strategies in order to try to maximise  the benefits of IC T in their economies. 
7.1. Overview of main ICT policy priorities and developments across Member States 
Member States with national ICT strategi es include Bulgaria ('Programme for the 
Development of Information Technologies'), Cy prus ('National Strategy for the Information 
Society'), Estonia ('Estonian  Information Society Strategy 2013'), Finland ('A renewing, 
human-centric and competitive Finland. The National Knowledge Society Strategy for 2007-
2015'), France ('Plan Numerique'), Greece ('Digital Strategy'), Ireland (a 'National Knowledge Society Strategy' is in preparation), Malta ('Smart Island National ICT Strategy 2008-2010'), 
Poland ('Strategy for Information Society de velopment till 2013'), Portugal ('Connecting 
Portugal'), Slovenia ('Strategy for the Developmen t of the Information Society in the Republic 
of Slovenia (si2010)'), Spai n (the 'AVANZA plan'), and the UK ('Digital Britain'). 
Many of these strategies follow or have simila r goals to that of th e i2010 initiative. Box 1 
provides an overview of Me mber States' strategies. 
Box 1: An overview of EU Member States national ICT strategies 
A total of thirteen EU Member States currentl y have or are setting up integrated national ICT 
strategies. This box gives a brief overview of these strategies. 
In Bulgaria, "in the third quarter of 2008 proposals fo r the adoption of two programmes with 
a three-year term of operation were elaborated : a national Programme for the Development of 
Information technologies and a national Pr ogramme for the Development of Broadband 
access. They are aimed at systematising the effo rts and providing for adequate conditions for 
accelerated convergence with the advanced in this  regard in the EU." (Republic of Bulgaria 
NRP 2008-2010) 
Cyprus  is developing an integrated National Stra tegy for the Information Society, the main 
target of which would be to exploit the opportunities provided by Information and 
Communication Technologies for improving co mpetitiveness of all sectors of economic 
activity. For this objec tive the following measures will be promoted: appointment of a 
Commissioner for Information Society; creating an appropriate institutional and regulatory 
framework for executing various activities vi a Internet; improving conditions of safe access 
and safe transactions via Internet; changing th e way of thinking and culture of the population 
and introducing both ICT and Internet into ev eryday life; and Expanding the coverage of 
broadband networks in rural areas to allow all citizens to have access from their homes to all 
services offered online. (NRP 2008) 
                                                 
71 This chapter has been written on the basis of Member States own information derived primarily from 
their National Reform Programmes and/or ICT strategy documents. 
 
EN 79   EN The " Estonian Information Society Strategy 2013" covers the period  from 2007-2013 the 
objectives are the following: that each member  of society leads a full life, using the 
opportunities of the information so ciety in every possi ble way and actively participating in 
public life ("nobody will stay or wi ll be left behind"); Estonia' s economic growth is based on 
the wide use of ICT solutions; and public sector is citizen-centred, transparent and efficient. 
(Estonian Information Society Strategy 2013 (2006) 
France 's national strategy has the goal of making it one of th e best ICT count ries by 2012, by 
providing 100% coverage of fixed and mobile  broadband and introduci ng digital television. 
The plan rests on four priorities: (1) to provide  access of the whole popul ation to the internet 
and digital services, (2) to deve lop the production and supply of di gital content, (3) to increase 
and diversify usage and digital services within enterprises, administrations and households, 
and (4) to modernise the governance of the digital economy. 
"The aim of Finland 's information society policy is to increase the user-friendliness of 
services and the competitiveness and productivity of companies, and to promote regional and 
social equality. In terms of information so ciety development, the key measures will be 
directed towards developing the following: in formation society infrastructure; the innovation 
environment and markets; content and services; expertise and preparedness. The public sector 
structures will be revamped and provision of electronic public services will be increased. In 
transport, the opportunities offered by telematics will continue to be exploited more widely 
and effectively." (NRP 2008, p63). 
The Greek 'Digital Strategy 2006-2013' aims to perf orm a "Digital Leap to Productivity and 
Quality of life". The strategy comprises two main objectives: enhanced business productivity 
through the use of ICT and new skills; and im proved quality of life through ICT. These two 
strategic objectives are further decomposed in to six sub objectives: to  boost ICT uptake by 
businesses; offer a large number of digital servi ces to businesses; support  the ICT sector as a 
pillar of the Greek economy; im prove citizen welfare through IC T; and develop e-services for 
the citizen. (The Greek Digital Strategy, Mi nistry of Economy and Finance, Special 
Secretariat for Digital planning). 
Ireland  is developing a 'National Knowledge Societ y Strategy' focused on the development of 
its knowledge economy in order to help accel erate the development of knowledge-intense 
areas such as: digital traded services; eLearn ing products and services ; and clinical trail 
infrastructure. More generally the Strategy will bring together the various actions and 
supports which will result in Ireland having the ability to develop, produce, licence and export 
products and services based on knowledge-intense ideas. 
The 'Smart Island National ICT Strategy 2008-2010' aims to set a vision for Malta  to become 
one of the top 10 information societies in th e world. The main objectives of which are to: 
prepare Malta for the next generation of technology by laying the foundations for a world 
class infrastructure; overcoming the last mile of the digital divide and making ICT a social 
equaliser; developing a smart workforce by inve sting in people and nurturing their skills and 
potential; using IST to improve quality of li fe; re-inventing government by transforming 
public service delivery and governance; enhanci ng the productivity of the private sector and 
its competitiveness through the adoption of eBusiness; and promoting Malta as an ICT hub 
for FDI whilst using ICT as a pillar fo r economic growth. (Malta NRP, p82). 
Poland 's current digital strategy is the 'Computerization Pl an for Poland in 2007-2010'. A 
new strategy is also being formulated for the period up to 2013: 'Strategy for Information 
 
EN 80   EN Society Development till 2013'. Together, these two strategies will be used to accomplish the 
following: Counteracting digital exclusion through financing access to the Internet for people 
of low incomes; and widening access to the Internet thro ugh supporting micro-, small and 
medium entrepreneurs intending to provide this  service in the regions  where this kind of 
business operation is  not profitable. 
In Portugal , the 'Connecting Portugal' programme, launched in 2005, will continue to be 
implemented giving special prio rity in the 2009-2010 period to R& D activities in the area of 
information and communication te chnologies and to eScience inst ruments; this includes the 
high performance network for research and educa tion, digital scientific libraries, the opening 
access information and scientific data stores a nd the Grid computing super computing and the 
work platforms for distance research. 
Slovenia  has developed a 'Strategy for the Devel opment of the Information Society in the 
Republic of Slovenia (si2010)', which constitutes a framework for the political direction to be 
taken towards developing an information society in Slovenia and, in terms of its structure, 
follows the European i2010 initiativ e. The purpose of this Strategy is, with the aid of efficient 
deployment of information and communications technologies, to promote competitiveness 
and productivity, ensure balanced social and regional development, and improve the quality 
of life of society as a whole and of each indivi dual. The main objective of the Strategy is to 
promote further the development of the informa tion society, which will  have a considerable 
impact on increasing efficiency and innovatio n in the Slovenian economy and society. 
Furthermore, it will result in an  increase in the number of jobs  with a high added value, an 
improved quality of life and more balanced regional development. (Slovenia, NRP, 2008-
2010) 
In Spain , the 'Avanza Plan' has the objective of c onvergence with the European Union in the 
field of Information Society. The plan comprise s a series of specific programmes focused on 
citizens, companies, the digita l context, digital public servi ces and eAdministration. Also 
since the end of 2008, the impl ementation of the 'AvanzaDos Plan' has begun with new 
strategic lines for developing th e information society for the period up to 2012. In view of 
problems finding locations for mobile telephony an tennas, one of the pl an's proposals within 
the framework of boosting infrastructure is to  reward local government s that do allow the 
antennas, thus contributing to improved coverage. 
Finally, in the United Kingdom , the recent 'Digital Britain' report sets out the next steps of 
the British government to maximise the economic  and social opportunities of ICT, with four 
action points: to assist the private sector in delivering an effective modern communications 
infrastructure, including a universal service commitment to ensure access to 2MB/s 
broadband services by 2012, and proposals to assi st the development of next generation 
broadband to those areas that will not benefit fro m commercial deployments; to enable Britain 
to be a global centre for the creative industrie s in the digital age, including public service 
content, within a clear and fair legal framework;  to ensure that people  have the capabilities 
and skills to flourish in the digi tal economy, and that al l can participate in digital society; and 
actions to modernise and improve  its service to the taxpayer through digital procurement and 
the digital delivery of public services. 
Whether Member States have an integrated na tional ICT strategy or no t, the types of ICT 
initiatives employed are often similar across countries. Though, their depth and complexity 
differs, to some extent, depe nding upon their state of ICT adva ncement, both generally and 
within specific areas. 
 
EN 81   EN Priority areas include, in particular, the diffusion of Broadband in frastructure and ICT 
equipment, the encouragement and promotion of Internet/ICT use, the development of digital 
skills (eLiteracy), the implementation of ICTs  within government and for the provision of 
government services (eGovernment), the digitali sation of the legal system (eJustice) and of 
health services (eHealth), and the integration of ICT into the education system (eLearning and 
eScience). In addition to these generally prio ritised areas, some Member States also put 
emphaisis on areas such as encouragement of eCommerce and eBusiness, ICT R&D, 
eSecurity and Green ICT. Table 1 shows the ra nking of these policies a nd the Member States 
involved in them. 
Table 1 :Ranking of policies and MS engaged in them: 
1. Infrastructure and Broadband diffusion: 
 AT, BE, BU, CY, CZ, DE, DK, EST, FI, FR, 
EL, ES, HG, IE, LT, LI, LU, MT, NL, PL, RO, 
SI, SK 
2. eGovernment: AT, CY, CZ, DE, DK, EST, FI, FR, EL, ES, IT, 
LT, MT, NL, PL, RO, SI, SK, UK  
3. eLearning/ICT in Schools  BE, BU, CY, EST, FI, FR, IE, EL, ES, LT, MT, 
NL, SI, 
4. eSecurity  AT, CY, FI, FR, EL, ES, LT, LI, LU, SK  
5. eScience and ICT R&D and Innovation  BE, BU, CZ, DE, FR, ES, LU, PL 
6. eInclusion/digital literacy  BU, EL, ES, HU, MT, RO, SK 
7. eHealth  CY, CZ, EST, EL, ES, PL, SI  
8. Encouraging use of ICT  BE, FR, EL, RO, SI, MT 
9. eCommerce and eBusiness  BE, CY, EL, ES,  
10. eJustice:  CZ, ES, PL, SI  
11. Green ICT:  DK, IE and LU 
12. Harmful content/protection of minors FI 
7.2. Specific ICT policies 
Countries' ICT policies can be broadly grouped in to three main types of policies. The first 
covers policies devoted to infr astructure deployment, the seco nd covers encouragement of use 
and digital literacy, and the third relates to  policies in the area of ePublic services. 
7.2.1.  Infrastructure deployment: fixed and mobile broadband diffusion 
All EU Member States put an  emphasis on policies to increase the cove rage of broadband 
throughout their economies. In particular, an in creasing number of countries have now set 
targets for broadband coverage of the population;  a large number of which are set at 100%. 
Countries with 100% broadband targets  include Austria, Germany, France (fixed and mobile 
by 2012, already 98%), Hungary (end 2010) Irel and (2010), Latvia (2010) and Slovenia 
(2010). The United Kingdom proposed a commitmen t to universal service. In addition, 
 
EN 82   EN coverage is approaching 100% in Belgium (100%), Denmark (100%), Luxemburg (100%), 
the United Kingdom (100%), Malta (99%), the Netherlands (99%, and investing in 100% 
fibre optic networks), France (99%) and Sweden (98%). In Greece a target has been set of 
60% coverage by 2009 and in Latvia 98% by  the end of 2010. Policies are increasingly 
focused on closing the gaps in rural areas, where provision of infrastructure by the market is 
not profitable. 
Figure 1 
Coverage of DSL networks as % of population, December 2008
0%10%20%30%40%50%60%70%80%90%100%
BE DK LU FR UK MT NL SE DE PT NO FI IS IT HU EE CY ES AT CZ SI EU27 LT IE LV EL BG SK PL ROTotal Rural
n.a.
 
Source: IDATE 
With regard to increasing the availability of broadband in schools many Member States have 
dedicated policies. In Belgium, a project cal led 'Cyberclasses' was initiated in 2008 to equip 
all schools in the French speaking communi ty with computers, servers and broadband 
(ADSL) within two years.72 Other Member States with polic ies to implement and/or upgrade 
ICT infrastructure in schools in clude Cyprus, Estonia, France, Greece, Spain, Ireland, Latvia, 
Malta, the Netherlands and the United Kingdo m. Slovakia plans a policy in this area. 
A number of Member St ates are also making efforts to increase the coverage of wireless 
networks,  particularly in urban re gions, for example with the implementation of wireless 
hotspots (RO and EL). Indeed in  Finland, wireless broadband c overage is expected to be 
available to the whole populati on by the end of 2009. In Greece,  special emphasis is being put 
on the development of WiMax  and satellite Internet combined with WiFi, in order for wireless 
technologies to cover as many areas as possible (and notably hard-to-acce ss and remote areas) 
and ensure fully reliable connections; higher speeds and lower costs for users/consumers. 
Policies are also being implement ed to extend the coverage of mobile services . In this regard, 
some countries (FR, LU, EL, ES, IE, FI, SE, DK, UK and SI) have  introduced or are 
introducing regulations/str ategies designed at the reorganisa tion of their radio spectrum in 
order to increase the efficiency of its use, eith er to make the way for mobile digital television 
and/or to allow for the further development of broadband. Some countri es, such as Spain, 
have actively encouraged the diffusion of mobile telephony antenna s by rewarding local 
authorities which allow them in their areas. Some countries are also working on very high 
                                                 
72 In 2004, 84 % of the Dutch speaking schools disposed of a broadband connection. 
 
EN 83   EN speed access via mobile (FR). In Sweden, 99%  of the population was already covered by 
mobile networks in 2007. 
A number of Member States  are also investing in fibre-optic networks  for very high speed 
access. While in some countries these networ k investments are limite d to the scientific 
community, in others they are intended for more general use by the population. France has 
implemented a strategy in this regard with  the goal of achieving 4 million users by 2012 and 
developing very high speed mobile. Lithuania ha s built networks in the main urban regions. 
The Netherlands has committed itself to 100% fibre optic networks. Finland has also set the goal of making high-speed br oadband available to the w hole population by 2015. Luxemburg 
is also investing in such ne tworks. Slovenia states its inte ntions to develop fibre optic 
networks. In Greece, in September 2008, a proj ect for developing Next Generation Networks 
based on fibre optic technologies for the esta blishment of an open access network providing 
high speed connections (100 Mbps minimum) wa s presented, thus, allowing for the gradual 
interconnection of more th an 1.5 million residences. 
Other infrastructure project s include the setting up of public access points in some Member 
States (e.g. in HU (rural and socially disadva ntaged), LV (rural areas), LT and RO) and 
projects designed to increase the ICT capacity of the scientific community (eScience), such as 
investments in the building of s upercomputer centres in a number of Member States (BE, BU 
and DE). 
7.2.2.  Encouraging the use of ICT/broadband, eInclusion and digital literacy 
In addition to the actual provisi on of infrastructure, Member States are implementing a range 
of policies designed at increas ing the up-take and use of br oadband and ICT more generally 
by various sections of society. 
Member States believe that an important way to  encourage a general incr ease in the take-up of 
broadband is through the encouragement of competition  (BE, CZ, DE, EL, FR, PL, SI, SE and 
the UK). 
Further to promoting competition in telecoms, a number of Member States have put policies 
in place focused on increasing the use of ICT by improving the digital literacy of the 
population. Many of these programmes are in the area of eLearning
73, focused on improving 
the ICT skills of students and teachers (BU, CY, EE, FI, EL, IE, LV, MT). However, some 
programmes are aimed at the general public, im proving the skills of the workforce (BU, EE, 
ES, MT) and/or that of the scientific community. 
With regard to the general public, in Belgium, the action 'Internet pour tous' (Internet for 
everyone) was carried out over the period 2006- 2007 to encourage the use of broadband. The 
action provided a packet incl uding broadband access,  a computer and a ttending a training 
course with subsequent VAT reimbursement. Hungary's 'Digital Literacy Action Plan (2008-
2010)' has the objective of reducing the country's proportion of 'digitally illiterate' (measured 
by the proportion of the population that does not use the Internet regularly) from 51% (2007) 
to 33% by 2010. In 2008, the rate was 44%. The plan is based on two pillars: reducing cognitive barriers and strengthening motivatio n; and developing skills. The plan will be 
                                                
 
73 Policies in the area of eLearning are discussed in more detail under the relevant section of the 
discussion on ePublic services. 
 
EN 84   EN evaluated and where necessary fine-tuned at the end of 2008 and 2009. Its implementation is 
intended as a response to the EU e-In clusion and e-Skills initiatives.  
Member States are also carrying out initiatives to promote ICT awareness and use . In Malta 
for example there are a number of initiatives specifically designed at promoting ICT use to 
disadvantaged groups, including th e unemployed and inactive, th e disabled and women. They 
include the 'Smart Start' initiative, designed to  help the unemployed, t hose on social benefit, 
the disabled and non-profit orga nisations to purchase a PC in  good working order. The 'Blue 
Skies Scheme' which provides households without an Internet connection with a connection at 
a cheaper rate, 'Smart women' which provides ICT training to women. 'Star Office' provides 
office software cheaply to students and the disabled. There is also an ICT awareness 
campaign aimed at attracting students. 
A number of countries are also encouraging the use of ICT by SMEs  (BE, CZ, ES, and HU). 
In Belgium, l'Agence Wallone de Telécommun ications (AWT) has developed an awareness 
raising strategy aimed at encour aging the use of ICT in SMEs. 
In the Czech Republic, the 'Opera tional Programme Enterprise a nd Innovation' is designed to 
foster the development of SMEs which plan to invest in information and communication 
technologies; through making use of EU funds. Th e programme 'ICT in Enterprises' provides 
support to entities that are planning to upgrad e their information systems to increase the 
effectiveness of their internal operations (e .g. production, ordering or  stock control) and 
improve their external relations (with custom ers, suppliers or public  administration bodies 
etc.). In addition, the programme 'ICT and St rategic Services' is designed for firms who 
decide to purchase or construct a building a nd employ developers and programmers with the 
aim to develop or upgrade ICT products and services. 
In Spain, the government signed 39 agreemen ts with the Autonomous Communities in 2006-
2007 to encourage e-commerce, in particular  electronic invoicing. These agreements 
mobilised 87.8 million euros in funding, half of  which came from the Central Government. 
Finally, as part of its e-Economy Action Pl an, Hungary has set up an SME training and 
motivation programme. The programme includes a se ries of actions designed to strengthen the 
digital maturity of SMEs and remove barriers  to ICT introduction a nd use. On the one hand, 
the aim is to train SME owners and executive s, increase their demand for ICT equipment and 
services and raise awareness of the importan ce of ICT. On the other hand, it aims at 
implementing organisational structural change s and management developments to promote 
the wider scope use of ICT equipment by SME ow ners and executives. Trainings to be held 
within the framework of the action aim to en courage company executives to invest in ICT 
equipment by demonstrating how company processe s can be upgraded by using this type of 
equipment. The training will also provide information on available financial sources, since according to surveys (e.g. eBusiness W@tch), the lack of the latter largely constrains the 
development of the ICT-related physical  infrastructure in enterprises. 
7.2.3.  Online public services 
The area of ePublic services broadly includes policies in the areas of  eGovernment, eHealth, 
eJustice and eLearning. 
All Member States are active in the im plementation of policies in the area of  eGovernment  
and the i2010 eGovernment Action Plan, which was approved by the Counc il of Ministers in 
 
EN 85   EN June 2006 and has already concrete impact th roughout Europe. Within national governments, 
common policies include the e xpansion of office automation, the digitalisation of public 
administration, the networking of national gove rnmental departments as well as between 
central and local authorities and the impl ementation of electronic public procurement 
(eProcurement). eProcurement was identified as a particularly important "high impact 
service". In this respect, G overnments are following up the i2010 eGovernment Action Plan's 
objective to reach 100% availability and 50%  effective use of eProcurement by 2010. 
Member States are currently working on large s cale pan-European pilot projects on electronic 
public procurement and the authentication of electr onic identities in order to combat risks of 
fragmentation of the internal market due la ck of interoperability of information and 
communication technologies. This is the fi rst step to better  cooperation between 
administrations, also beyond national borders. 
With regard to the provision of public servi ces, and communication between government and 
the general public, many Member States have se t up or are setting up 'one-stop-shops' for 
citizens and businesses and points of single c ontact for businesses, , in line with the 
requirements of the EU's Services Directive.  Many Member States are also implementing 
electronic company registration and provisions for online submi ssion of tax declarations. In 
some countries, they are introducing systems of  data repositories fo r communication between 
individuals and companies and state bodies. Finally, the major ity of Member States have 
policies for the implementation of eParticipa tion in place and are supporting disadvantaged 
groups to get online and making public websites more accessible and user friendly to this end. 
Many of the above mentioned po licies are being implemented as part of a package of 
measures designed at achieving efficiency ga ins, reducing administrative burden and cutting 
'red tape'. In particular, the move to electr onic registration of companies is, in many cases, 
seen as a way of encouraging entrepreneursh ip (by reducing the time it takes to set up a 
business), making company information availabl e to citizens across th e EU and, therefore, 
meeting commitments made in this regard. 
At the same time as developing eGovernment, Me mber States have also been working on 
improving the  conditions  for electronic communications be tween governments and citizens, 
businesses and the government through the development and promotion of electronic 
identification (eID) and electronic signatures.  Austria, one of the European leaders in 
eGovernment, emphasises in pa rticular eSecurity (Box 2). 
Box 2: eSecurity in Austria 
In Austria, since January 2008, the social security eCard can be re gistered over the Internet as 
a 'Bürgerkarte' and authenticated for the purpo ses of electronic signat ure. This was made 
possible through a simplification of  the 'Signaturgesetz' (the law governing signatures), which 
took place together with a nu mber of other legal change s introduced to enable the 
development of eGovernment. These changes also made it possible to use the card for private 
transaction authentication w ith for example banks and insurance companies, providing 
customers with protection against 'Phishing'. In addition to electronic identification and 
signature, the card can also be used for encr yption for the transmissi on of sensitive data. 
Further to the 'Bürgerkarte' a new software pr ogramme has been developed for the creation of 
signature of PDF documents. The authentication of signatures on electronic documents can be 
verified via a dedicated website ( www.buergerkarte.at/signature-verification/ ). It is hoped that 
 
EN 86   EN these tools will encourage the electronic sending of invoices, an area in which is believed will 
deliver significant efficiency and cost savings. 
Further developments in the area of eSecurity  include the introduction of electronic proxies, 
development of recorded electronic delive ry of documents and dual document delivery 
(electronic and paper), and the de velopment of an eSecurity handbook.  
In their National Reform Plans (NRP's), a numb er of Member States report on the policies 
they are implementing in the area of eHealth  (CY, CZ, EE, EL, ES, PL and SI). The range of 
activities includes equipping hospi tals with new computers (ES) , developing national health 
information systems (CY, EE, EL and PL), se tting up web portals for public access to medical 
services such as managing hospital visits online (CY and PL), development of digital 
prescriptions (EE and ES), elect ronic health cards (EL) and se tting up of electronic medical 
files (EL and ES). In addition, Greece is implem enting an eHealth action plan also covering a 
number of initiatives related to tele-medicine. 
A number of countries have also introduced policies in the area of eJustice  (AT, CZ, ES, FR, 
PL, SI). These policies also in clude introduction of computers, digitalisation of records and 
the setting up of eCourts. 
Programmes in the area of eLearning  include 'Cyberclasses'  in Belgium  (mentioned above). In 
Cyprus promotion of eLearning includes in creasing the number of computers and their 
connection to the internet, in terconnecting schools via Intran et, developing an electronic 
system providing parents with information on th eir child's performan ce and attendance etc. 
and providing continuous training to teache rs in IT technologies and new analytical 
programmes. Estonia's eLearning programme focuses on developing learning software, 
updating study methods, complementing hardware and improving teacher qualifications in the 
use of eLearning. In Finland, a project starte d in 2008 on the 'Utilisatio n of Information and 
Communication Technology in Education and St udy' will develop a new electronic learning 
environment by 2010. In addition to the goal of 100% coverage of educational institutions with broadband, the French eLearning policy is developing a services portal which will allow 
all members of the education community simple and secure access to all content and services 
adapted to their needs, as well as to digital resources, communication services and services for 
collective/collaborative work. From 2010, universities will be obliged to use electronic 
homework books and schools will have to move to paperless internal communication. Further, 
a number of projects will be introduced which require broadband access, for example the project targeted at learning of languages vi a video conference with native speakers. 
In Greece, a number of projects continue to be run to increase the digital literacy and use of 
students. They include projects  to encourage access to broa dband ('DIODOS'), to subsidise 
the purchase of laptops for top ranking first ye ar students ('See your life digitally'), a pilot 
project (starting in 200 9) to provide speciall y designed laptops to school pupils aimed at 
getting them acquainted with new technologies early on ('A laptop per st udent'), and certified 
training courses for top student ('e-ducate') [Also 'Organic.Edunet' (eContent) and 'EDET' 
(research network: ICT R&D)]. 
In Spain, the Avanza Plan has provided IT e quipment in almost 9,000 schools, benefiting 2.5 
million students (around 45% of the student population). Also, the 'Networked Campus 
Programme' provides public unive rsities with wireless Internet. The 'Latvian Educational 
System Informatization Programme for 2007- 2013' envisages the establishment of an 
educational information system, teacher training in the use of ICT, development of electronic 
 
EN 87   EN education materials, establishment of an in teractive portal for teachers and parents, 
computerization of schools and libraries and a number of other measures to improve the 
quality of education. Malta's eLearning Strategy  also focuses on infrastructure in schools, 
teachers' and students' skills and resources, incl uding actions to provide teachers with laptops, 
introduce high speed Internet, setting up an eLearning platform, training teachers, and developing web-based learning resources . The Netherlands and Slovenia are also 
implementing similar actions in the area of eLearning. 
7.2.4.  Other policies 
Other ICT policy areas in which some Member  States have been active include ICT R&D 
(ES, EL, BU and PT), Green ICT (DK, IE and LU), harmful content/pr otection of minors (FI) 
and Quality of life/flexible working arrangements/teleworking (EE). 
7.3. Conclusions 
The information provided by National authoriti es in their National Reform Programmes 
shows that Member States acro ss the EU have recognised the im portant role played by ICTs 
in our modern Knowledge-based so cieties. ICT policies have come  to the forefront of national 
policy making, being integrated into many di fferent areas of policy and increasingly 
formulated as part of larger-sca le national ICT strategies with si milar objectives to that of the 
i2010 initiative. Policies have largely been fo cused in three main areas: infrastructure 
provision to achieve complete coverage of the population, in partic ular in relation to 
broadband; policies encouraging take-up and use of ICT and acquisition of  digital skills; and 
provision of ePublic services. 
Going forward national ICT policies need to buil d on the achievements of  the past, both at a 
national level as well as by learning from best practices internationally. However, they also 
need to tackle ongoing problem areas as well as venture into new territory.  
Information and communication technology is a ke y driver of economic growth and social 
change. A wealth of evidence shows that IC T is an important s ource of productivity, 
innovation and growth, increasing our comp etitiveness, creating jobs and driving 
globalisation, while at the same time presenting us with new instruments with which to tackle a number of our societal challenges such as c limate change, energy effi ciency and an ageing 
population. As such, ICT is at the very heart of the Lisbon strategy and essential to its 
success. 
In times of economic and financial crisis, it is important that this key role of ICT is not 
forgotten. Investments in ICT are 'smart' investme nts; helping to create and maintain jobs and 
growth now, and emerge from the crisis stronge r and more quickly, while at the same time 
creating the basis for sustainable growth and jobs in the future. In the short term, ICT 
investments support employment in ICT-related sectors. In the longe r term, they increase 
efficiency, lead to innovation and make  the whole economy more competitive. 
In the current economic  situation, pressure on national bu dgets and private financing may 
slow down the rate of planned ICT investme nt. Community funding can  contribute to support 
public investment. Under Cohesion Policy pr ogrammes, €15.2 billions are foreseen for 
investment in ICT in the period 2007-13. Thes e programmes should be a ccelerated to give a 
timely boost to public ICT investment at the national, regional and local level. 
 
EN 88   EN If we are serious about the Lisbon ambition fo r a "dynamic, knowledge-based society" , we 
must invest (as least) as much in the info rmation highways of the future – a smart grid, 
broadband for all and better health care – as we  do in more traditional infrastructure. The 
crucial role of ICT for economic recovery ha s been recognised in the European Economic 
Recovery package, which foresees up to 1.02 b illion in EU funds for investment in broadband 
networks. In basing the recovery on ICT and innovation, we are also presented with the 
opportunity to restructure the economy toward s a more sustainable future, by reducing our 
environmental impact, increasing our energy effi ciency and creating a more inclusive society. 
 
EN 89   EN 8. THE IMPACT OF THE ECONOMIC DOWNTURN ON THE ICT  SECTOR  
In the second half of 2008, the dramatic worsen ing of the financial crisis led to severe 
disruptions in credit intermediation and a significant fall in consumer and business 
confidence. As the financial crisis intensifie d last Autumn, economic indicators deteriorated 
and global economic activity fell sharply during th e last quarter of 2008, w ith historical drops 
in trade and production. The economic outlook rema ins uncertain as the world faces its worst 
crisis since the Second World War. The crisis  has important repercussion on the European 
economy. 
According to the Commission's Spring forecast (4  May 2009) GDP growth in the EU and the 
euro area dropped below 1% in 2008 (down from  just under 3% in 2007). In 2009, real GDP 
is expected to fall by 4% (See Annex). The dow nturn is projected to be broad based, with 
almost all Member States expected to post negative growth rates this year. GDP growth should stabilise somewhat in 2010 but remain sli ghtly negative, at -0.1% both in the EU and 
in the euro area. Inflation is expected to con tinue to fall rapidly this  year, entering negative 
territory for a few months in the middle of th e year. Unemployment in the EU will soar to 
9.4% in 2009 and 10.9% in 2010; and in the euro area to 9.9% and 11.5%, respectively (see Annex). Budget deficits and de bts will also rise sharply. 
This chapter provides an overview of the impact  the crisis is having on the ICT sector on the 
basis of recent updates of leading consulting analysts.
74  
8.1. The impact of the crisis on the ICT sector 
Latest data on the ICT sector in Europe available from Gart ner (March 2009) shows that the 
economic crisis is having a major impact on th e ICT sector in Europe. While in December the 
sector seemed to be holding up quite well compared  to other sectors, late st forecasts project a 
strong downturn. In Western Europe, total end-us er spending on ICT is now expected to fall 
8% in 2009 and to remain flat in 2010 before  increasing to 3 per cent in 2011. In Eastern 
Europe, the situation is expected to be worse,  with a 10% decline in 2009 and a 2% decline in 
2010. In 2011, spending is projected to increase  by 4%. While the downt urn is expected to 
have a significant impact on all segments, some sectors (manufacturing) will be more strongly 
hit than others (software). 
                                                 
74 As changes are taking place rapidly, current forecas ts are being frequently updated and include a high 
element of uncertainty about the length and the se verity of the economic downturn. Thus, estimates 
provided in what follows should be treated with caution. 
 
EN 90   EN Figure 1 
End-user spending on ICT by Region
(% change on previous year)
-10-8-6-4-20246810
2008 2009 2010 2011
Worldwide Western Europe Eastern Europe
 
Source: Gartner (March 09) 
8.1.1.  Consumer goods and services 
According to Gartner (March 2009), worldwide sp ending in computer hardware is expected to 
fall sharply in 2009 (-15%), revi sing its December 2008 forecas t (-5%). A 1% rebound of the 
same market is expected in 2010. The forecas t is however gloomier for Europe. While in 
Western Europe the computer hardware market is also expected to shrink by 15% in 2009, the 
recovery is expected to come later. The mark et is expected to continue contracting in 2010 
before recovering modestly in 2010. In Easter n Europe, the outlook is substantially worse. 
Sales are expected to contract 27% this year and will only start to recover in 2011. 
Problems in the personal computer business have  increased the likelihood  that 2009 will bring 
the first decline in PC sales75, showing that corporate buyers in  particular are cutting back, 
and low-priced machines could replace sales of  traditional laptops. Negative expectations are 
also reflected in the sentimen t of the European IT hardware  producers. In November 2008, the 
confidence indicator76 for the European computer industries77 was at its worst level in more 
than 20 years and the situation was confirmed in  December (latest available data), with likely 
layoffs to accommodate the impact of weaker demand on balance sheets. 
The impact of the current economic downturn should be less severe on world demand for 
software. According to Gartner (March 2009), gl obal software spending should stagnate in 
2009 (0% growth). Never-the-less,  this is a clear slowdown from the 7% that was still 
expected in December 2008. A return to growth of 5% is forecast already for 2010. In Europe, 
the software segment is expected to fare worse than at the global level, especially in Western 
Europe. Spending is expected to decline by 6% and 4% in Western and Eastern Europe, 
                                                 
75 FT, 9.2.2009: http://www.ft.com/cms/s/0/855ae2ce -f648-11dd-a9ed-0000779fd2ac.html  
76 http://ec.europa.eu/economy_finance/db_indicators/db_indicators8650_en.htm . It includes: assessment 
of order-book levels, assessment of stocks of finished products (negative sign), production expectations 
for the months ahead.  
77 NACE 30: Computer and office machin es. Seasonally adjusted values. 
 
EN 91   EN respectively, in 2009. In 2010, however, software  sales are expected to show a marked 
recovery, recording growth rate s of 4% and 6%, respectively. 
Global spending on IT services is forecast to contract 2% in 2009, down from 10% growth in 
2008, but to rebound in 2010 with around 4% growth.  In comparison, IT services are 
projected to decline 8% in Western Europe and 3% Eastern Europe in 2009. However, here 
too, a recovery is expected in 2010 with growth of 3% and 7% projected, respectively, for the 
two regions. 
The combined expectations for software and IT services markets suggests that businesses will 
keep on spending to keep their information systems running, but may tend to postpone new 
projects. Nevertheless, increased pressure on pr ofitability might push businesses to invest in 
solutions leading to better proce ss efficiency. Furthermore, regula tion in the financial sector is 
expected to have a positive impact on demand for software. 
In 2008, the European telecom serv ice sector continued to grow (1.3% in real terms, 0.5% in 
nominal terms), and investment was still on the rise (about 52 billion euros). The telecom 
services sector is not as profitable as it wa s in previous years but  is withstanding the 
deterioration in the economic climate better than  other sectors thanks to  the stability of its 
cash flow (due to the essential nature of basi c telecom services, increasingly offered at flat 
rates) as well as to relatively low debt le vels. Many consumers now consider communications 
services (fixed and mobile voice and broadband  access) along with other utilities such as 
electricity, natural gas, water or sewage that cannot be ea sily dropped from consumption 
habits. 
The economic deterioration in 2009 however is ex pected to put further downward pressure on 
investment and consumer spendi ng with the risk of  postponing the launch and the take-up of 
new and innovative services. A c ontraction in revenues in 2009 is however to be expected. 
According to Gartner (March 2008) growth in c onsumption of telecom se rvices is forecast to 
decline in Western and Eastern Europe in  2009 (-6% in both regions) and to continue 
declining in 2010, though at a slower rate. A retu rn to positive growth is projected in 2011. 
The decline was already evident in 2007, driven by the maturity of some markets. In 2008, 
before the crisis unfolded, operators were l ooking for improvements in average revenue per 
user through deployment of new services, cuts  in operational expendit ure by means of next 
generation networks deployment, and investme nt in dynamic economies in Eastern Member 
States or in emerging economies like South Am erica. In future, however, lower spending 
capacity by businesses and house holds may slow the adoption of  new services (as consumers 
rationalize spending plans to focus on core tele com services) and make major operators focus 
on the less mature markets. The credit crunch and uncertainty in terms of take-up may delay investment in high-speed and mobile broadba nd. The evolution of the crisis in emerging 
economies is not helping the strengthening of  the revenues generated outside Europe.  
8.1.2.  The internet segment 
The economic crisis is also having an impact on firms in the Internet sector, which is heavily 
US dominated. Growth in revenues of the major players declined  continuously throughout 
2008. However, the picture is somewhat fragmented – while some firms continue to post positive rates of growth others have moved into negative territory. In the retail segment, while 
Amazon still posted positive year-on-year grow th in the first quarter of 2009 of 18% 
(nevertheless, down from 37% in Q1 2008), eB ay had experienced a negative rate of -8% 
 
EN 92   EN (down from 24% in the first quarter of 2008). Similarly, in the online advertising segment, 
Google reported 6% year-on-year growth in quarter 1 (down from 42% a year earlier), 
compared to negative growth of 13% for Yahoo (down from 9% in the first quarter of 2008). 
Business models in the internet sector are largely based on advertisement. Evidence is 
emerging that the online advertising market will act ually benefit from the crisis, as it is acting 
as a catalyst for the transfer of advertising to the online market from more traditional forms of 
media (See Box 1). 
Box 1: The impact of the economic crisi s on the market for online advertising 
Online advertisement is the main source of reve nues for Internet companies. Thus the impact 
of the economic crisis on online advertising is of critical importance to the future of this 
sector. As marketing spending is one of the first costs businesses cut when faced with a 
slowdown in sales, the crisis could be expected to have a particularly significant impact on the 
Internet sector. 
While advertising on traditional media has been severely hit by the global economic 
downturn, online advertising has kept growi ng, though at a slower pace than hitherto. 
Online advertising market 
010203040506070
2005 2006 2007 2008 2009e 2010e 2011e 2012eBillion €
EU 27 USA World 
Source: Idate News 466  – 27 April 2009 
According to IDATE, in 2009 the Internet will  likely be the medium to enjoy the greatest 
increase in ad spending, even if overall in vestments will be down, thanks to higher 
accountability and to innovative formats.  
The global online advertising market had a ne t worth of €30.6 billion in 2008, and will climb 
to €58.8 billion in 2012 – accounting for 15% of advertiser s’ total spending.1 The average 
growth rate increase between 2009 and 2012 would be 19.6%.  
According to IAB Europe2, online advertising in Europe was worth €11.2 billion in 2007 (a 
40% increase from €7.2 billion in 2006). The Eu ropean online advertising market is closing 
the gap with the US (€14.5 billion in the same  period). The sectors spending the most in 
online advertising in 2007 were Entertainment & Leisure, Telecoms and Finance & Insurance. 
 
EN 93   EN Nevertheless, the decrease in the overall advertising market is not balanced by the increase in 
the online advertising market. According to recent forecasts3, expenditure in general 
advertisement will decline by 6.9% in 2009. 
The economic crisis could actually be benefi cial for the Web. As c onsumers are spending 
more time at home, consumption of the internet and media may increase. Moreover, search 
activities on the web are driving Internet adve rtising growth as consumers are shifting from 
premium to value product s and look for bargains. 
Indeed, the reasons for the sust ained growth of the online adve rtising market are: firstly, a 
growth in Internet use (both in  terms of time spent and total number of users); and secondly, 
the shift from advertisers from traditional media to the Internet. 
New forms of advertising such as viral marketing4 in social networks or gamevertising5 are 
taking full advantage of the interactive possi bilities of the web and of digital content. 
Expenditure in advertising based on location thr ough mobile devices is expected to increase 
with the development of mobile broadband. 
Search and display are the most  dynamic advertising segments. Most of the growth in internet 
advertising will come from search advertisi ng (driven by companies like Google, Yahoo and 
Microsoft). Search marketing wi ll represent half of the global  online advertising market in 
2009, or 17.2 billion EUR (53% of the market in 2012, generating an estimated 31.3 billion 
EUR).6 
The display advertising internet category can be split into banner advertising and online 
video. While banner ads are getting increasingly commoditised, online video is growing 
through volume and premium rates.  Revenues from display ads will go from 12.3 billion EUR 
in 2009 to 21.2 billion EUR in 2012 in the worl d. Display share of the global market will 
stabilise at around 36% thanks to the developmen t of video advertising formats. Video ads are 
expected to be the online format with  the strongest growth in the future.7 
1 IDATE News 466 – 27 April 2009 
2 Interactive Advertising Bureau Europe, 2nd June 2008. Europe = AT, BE, DK, FI, FR, DE, EL, IT, NL, NO, PL, SL, ES, SE, TK, UK  
3 ZenithOptimedia: 14 April 2009 
4 Marketing techniques applied to social networks and blogs that take full advantage of interactivity to increase to word-of-mo uth with Internet network effects.  
5 Advertising in videogames. 
6 IDATE News 466 – 27 April 2009 
7 IDATE News 466 – 27 April 2009 
Other success stories include Apple.  Its year-on-year growth rate  of revenues for Q1 2009 was 
8.7%. However, this is down considerably from the 25% rate of growth recorded in Q4 2008. 
Apple is one of the companies monetising an open innovation model. As of April 2009, in the 
nine months since its launch, one billion appl ications were downloaded from "App Store", its 
internet based shop, half of them in the la st quarter (with an es timated value of €149.5 
million)78. App store sells five million app lications through the web per day. 
The reasons behind the success are the big supp ly coming from third-parties (Apple retains 
30% of the revenues coming from these applications while the re st goes to th e developer) and 
the simplicity of the interface. However, the co mpany makes the bulk of its revenues from the 
sales of devices and not from the sale of conten t. It is interesting to  note that the digital 
                                                 
78 Needham & Co 
 
EN 94   EN content (for instance videogames de veloped by third-parties) is bei ng used as a tool to create 
value for the product. It is estimated that w ithout the "App Store", Apple would have sold 
between 10% and 15% less iPhones.79 
8.1.3.  The ICT manufacturing sector 
European manufacturers remain world leaders in  the production of netw ork equipment, with 
around 70% of the worldwide market, leveragi ng on their technologi cal leadership and 
multinational presence. However, the rapid dete rioration of the economic conditions since the 
last quarter of 2008 is reflected in estimates of  expenditure in telecom equipment, both with 
regards to infrastructure equipment80 and to mobile handsets. In March 2009 Gartner 
estimated the year-on-year growth  rate for the segment for 2009 at -6½% at the global level 
and at -9½% and  -10% for Western and Eastern Europe respectively. This represents a 
significant downward revision from the still posi tive rates of growth forecast for 2009 at the 
end of last year. While a slowdown in global sa les of mobile handsets (-7%) can be blamed 
for most of the decline, expenditure in infras tructure equipment (-3%) is also expected to 
decline.  
Nonetheless, views on the impact of the curre nt climate on growth are diverging. With the 
exception of Ericsson, both Alcatel-Lucent and Nokia Siemens Networks have seen negative 
annual growth rates in revenue s in the last quarter of 2008 and first quarter of 2009. One 
manufacturer expects a lift in demand driven by data traffic growth, boosted by uptake of 
wireless datacards in laptops, while the two ot hers are less optimistic, with one forecasting a 
reduction between 8% and 12% in revenues from  telecommunications equipment and related 
deployment services. 
• While the handset divisions of equipment manuf acturers may expect a ba d financial year in 
2009, there are diverging views on how increas ing traffic in mobile broadband and 
investment in next generation fixed broadband access will spur demand for 
communications infrastructu re by telecom operators;  
• Manufacturers expect an increase in demand for network equipment in emerging markets 
such as China and India. Global contract sales of Huawei jumped by 46% in 2008 to €18.3 
billion; the company also forecasted sales of more than € 23.5 billion in 2009 and has 
proved the best performing compa ny in the segment. Its low prices, in part related to the 
strength of the euro, may represent a furt her barrier to the recovery of European 
companies. 
8.1.4.  Semiconductors 
Semiconductors are a key intermediate input into  ICT equipment, as well as into other goods, 
such as cars. As such, they are considered as a crucial input into other sectors. Production is highly cyclical (dropping sharply during downt urns and recovering quickly in upturns) and 
the current slowdown is no exception. Accordin g to Gartner (March 2009), 2009 will witness 
strong negative growth in worldwide chip sales (-24%), driven by a slowdown in PC 
purchases, digital appliances and mobile hands ets. Semiconductor companies have already cut 
                                                
 
79 Global Equities Research 
80 Infrastructure equipment is divided into seven ma jor segments: access, switchi ng, routing, transport, 
business support systems, operations suppo rt systems and mobile infrastructure 
 
EN 95   EN their production by closing some facilities or  by lowering the utilisation rate and are 
tightening inventory control. This should ha ve a positive impact on market prices. The 
uncertainties of the semiconductor industry ultimately reflect the overall economic and 
financial turmoil. 2010 and 2011 are however e xpected to be strong rebound years; with 
growth expected of 7.5% and 9.8% respectively (Gartner March 2009).   
Not all the difficulties in the semiconductor indust ry can be attributed to the economic crisis. 
The crisis comes on top of chronic oversupply,  for example in the dynamic random access 
memory market (DRAM), which has seen ma ny conglomerates separate or sell their 
semiconductor business over the last two years in  order to restore their own profitability. The 
beginning of this year already saw Qimonda (controlled by Infineon and the world's fifth-
largest manufacturer of DRAM chips), file for bankruptcy as a result of the combined effect 
on its business of the slide in chip prices a nd decreased access to financing on the capital 
markets. Other important players are al so suffering severely from the crisis. 
8.2. Conclusions 
This chapter has analysed he extent of the im pact of the economic crisis on the ICT sector. 
The analysis, which is based on market data, sh ows that, while at the end of 2008 the sector 
seemed to be holding up quite well compared to other sectors, it is now being significantly 
affected and is expected to undergo a downturn. In Western Eu rope, total end-user spending 
on ICT is now expected to fall eight percent in 2009 and to remain flat in 2010 before increasing to three percent in 2011. In Eastern Eu rope, the situation is expected to be worse, 
with a 10 percent decline in 2009 and a two percent decline in 2010. In 2011, spending is 
projected to increase by  four percent. While the downturn is  expected to have a significant 
impact on all segments, some sectors (manufactur ing) will be more st rongly hit than others 
(software). The telecom equipment industry, which is Europe's traditional strength, and 
semiconductors are being hit by th e crisis more than other ICT segments. The service segment 
(telecoms and software) is tempering the crisis  thanks to sustained demand for traditional 
services. The internet industry, mainly US domin ated, is weathering the storm better than any 
other part of the sector. 
The ICT sector is the largest R&D investor in  Europe and research activities are largely 
concentrated in its manufacturing segments . The economic slowdown, its uncertain outlook 
and the expected brake on earnings suggest a slowdown in the growth  of R&D expenditure. 
There is a risk that the current financial cr isis may undermine the recent positive development 
in R&D investment rate by European businesses.  As the private sector will tend to limit its 
R&D spending, it would become all the more important to ensure that the public sector sustains, and even increases, its support to R& D. The next chapter of the report looks at the 
impact of the crisis on R&D spending in more detail.  
 
EN 96   EN Annex 
Table 1: GDP at constant prices (annual % change) 
 
2006 2007 Estimates 
2008 Forecasts 
2009 Forecasts 
2010 
BE 3.0 2.8 1.2 -3.5 -0.2 
DE 3.0 2.5 1.3 -5.4 0.3 
IE 5.7 6.0 -2.3 -9.0 -2.6 
EL 4.5 4.0 2.9 -0.9 0.1 
ES 3.9 3.7 1.2 -3.2 -1.0 
FR 2.2 2.2 0.7 -3.0 -0.2 
IT 1.8 1.5 -1.0 -4.4 0.1 
CY 4.1 4.4 3.7 0.3 0.7 
LU 6.4 5.2 -0.9 -3.0 0.1 
MT 3.2 3.9 1.6 -0.9 0.2 
NL 3.4 3.5 2.1 -3.5 -0.4 
AT 3.4 3.1 1.8 -4.0 -0.1 
PT 1.4 1.9 0.0 -3.7 -0.8 
SI 5.9 6.8 3.5 -3.4 0.7 
SK 8.5 10.4 6.4 -2.6 0.7 
FI 4.9 4.5 0.9 -4.7 0.2 
€ area 2.9 2.7 0.8 -4.0 -0.1 
BG 6.3 6.2 6.0 -1.6 -0.1 
CZ 6.8 6.0 3.2 -2.7 0.3 
DK 3.3 1.6 -1.1 -3.3 0.3 
EE 10.4 6.3 -3.6 -10.3 -0.8 
LV 12.2 10.3 -4.6 -13.1 -3.2 
LT 7.8 8.9 3.0 -11.0 -4.7 
HU 4.1 1.1 0.5 -6.3 -0.3 
PL 6.2 6.7 4.8 -1.4 0.8 
RO 7.9 6.2 7.1 -4.0 0.0 
SE 4.2 2.5 -0.2 -4.0 0.8 
UK 2.8 3.0 0.7 -3.8 0.1 
EU 3.1 2.9 0.9 -4.0 -0.1 
US 2.8 2.0 1.1 -2.9 0.9 
JP 2.0 2.4 -0.7 -5.3 0.1 
Source: European Commission Spring Forecast, May 2009 
 
EN 97   EN Table 2: Number of unemployed (as % of the labour force) 
 
2006 2007 Estimates 
2008 Forecasts 
2009 Forecasts 
2010 
BE 8.3 7.5 7.0 8.5 10.3 
DE 9.8 8.4 7.3 8.6 10.4 
IE 4.5 4.6 6.3 13.3 16.0 
EL 8.9 8.3 7.7 9.1 9.7 
ES 8.5 8.3 11.3 17.3 20.5 
FR 9.2 8.3 7.8 9.6 10.7 
IT 6.8 6.1 6.8 8.8 9.4 
CY 4.6 4.0 3.8 4.7 6.0 
LU 4.6 4.1 4.9 5.9 7.0 
MT 7.1 6.4 5.9 7.1 7.6 
NL 3.9 3.2 2.8 3.9 6.2 
AT 4.8 4.4 3.8 6.0 7.1 
PT 7.8 8.1 7.7 9.1 9.8 
SI 6.0 4.9 4.4 6.6 7.4 
SK 13.4 11.1 9.5 12.0 12.1 
FI 7.7 6.9 6.4 8.9 9.3 
€ area 8.3 7.5 7.5 9.9 11.5 
BG 9.0 6.9 5.6 7.3 7.8 
CZ 7.2 5.3 4.4 6.1 7.4 
DK 3.9 3.8 3.3 5.2 6.6 
EE 5.9 4.7 5.5 11.3 14.1 
LV 6.8 6.0 7.5 15.7 16.0 
LT 5.6 4.3 5.8 13.8 15.9 
HU 7.5 7.4 7.8 9.5 11.2 
PL 13.9 9.6 7.1 9.9 12.1 
RO 7.3 6.4 5.8 8.0 7.7 
SE 7.0 6.1 6.2 8.4 10.4 
UK 5.4 5.3 5.6 8.2 9.4 
EU 8.2 7.1 7.0 9.4 10.9 
Source: European Commission Spring Forecast, May 2009 
 
EN 98   EN 9. R&D  IN ICT  AND THE WORLD ECONOMIC CRISIS  
R&D is the main driver of innovation and techno logical change, and as such, it is the main 
determinant of long-term productivity growth an d living standards. This  chapter addresses the 
evolution in ICT R&D expenditure  over the last years. It starts off with a macro-economic 
analysis of the importance of IC T research in the EU27 Member States. A distinction is made 
between business spending and governmental f unding, both in terms of absolute amounts and 
GDP percentages, revealing important differences  within the Union, as well as a considerable 
gap with Europe's main international competito rs. This gap, particularly the EU-US gap, is 
mainly explained by differences in the size and the composition of the ICT industry. Indeed, when looking at firm-level evidence, the R&D effo rt (R&D spending relativ e to total sales) in 
the two economic areas is very similar.  
This is why in a second step the country-base d analysis is complemented by a comprehensive 
firm-level analysis covering the period 2000-2009. The data is provided by companies' annual 
and quarterly financial reports. For all sector s, a fallback is observed following the dotcom 
bust in the beginning of the 21
st century, with recovery taking  place after 2005. First quarterly 
results indicate however that the world economic  crisis is already impacting on R&D levels. 
Reduced cash flows and credit constraints (inclu ding a reduction in ventur e capital) is making 
R&D investment pro-cyclical.  
Given the crucial contribution of innovation by  the ICT sector to productivity growth, long-
term strategic choices by governments in this  area are of fundamental importance. The 
chapter therefore concludes by drawing attention to initiatives taken at EU level to deflect the actual crisis. 
9.1. Country-level analysis 
R&D intensity is more industry than country specific. Industry specificity may be due to the 
fact that each industry has a par ticular technological trajectory (roadmap) and cost structure, 
including what share of the revenues can be devoted to R&D, and the specific competitive conditions it faces.  
However, country-level analysis provides additi onal insights on the economic role that ICT 
R&D plays in the EU Member States. The latest available evidence
81 refers to 2005 and 
shows that the ICT sector is the largest R& D investing sector of EU, US and Japanese 
economies. Although the ICT sector in the EU contributes only a bout 3% of total employment 
and about 5% to total GDP, it drives 26% of  overall business expenditure in R&D (BERD)82 
(Figure 1) and employs 32% of business sector researchers. The sector also provides other 
industries with productivity enha ncing technologies, he nce contributing direc tly and indirectly 
to increasing labour productivity and EU competitiveness.  
                                                 
81 JRC-IPTS Report: "The 2009 Report on R&D in ICT in the European Union" (T urlea et al.,2009). This 
report is part of the project: "Prospective Insights on R&D in ICT" (PREDICT) funded by the European 
Commission. Report available at: http://ipts.jrc. ec.europa.eu/publications/pub.cfm?id=2259.  
82 2005 figures, the latest available. 
 
EN 99   EN Figure 1 
Share of ICT in EU total BERD (2005)
ICT
26.4%
Pharmaceutical and 
biotechnology
13.0%
Machinery and equipment
7.9%Automotive
15.3%Aerospace
7.1%Other sectors
30.3%
 
Source: PREDICT 2009 Report 
R&D in ICT in the European Union is highly  concentrated. The EU-15 accounts for 98% of 
the total while the new Member States are responsible for 2%. Germany (26.2%), France 
(17.3%) and the UK (12.8%), the largest economie s, are the biggest spenders. When relating 
R&D to the size of the different economies, a di fferent picture emerges: it is in the Nordic 
countries (Finland, Sweden and Denmark) where the contribution of the ICT sector to the overall R&D intensity is the highest (Figure 2) . Secondly, the majority of low R&D-intensive 
Member States (i.e. all new Member States) is  catching up with the remainder of the Union
83, 
and structural and knowledge economy i ndicators in these countries are showing 
improvements, which in return c ould increase the attractiveness of foreign direct investment 
(FDI)84.  
                                                 
83 This is not the case for four new Member States (B ulgaria, Poland, Malta and Slovakia), for which the 
gap with the rest of Europe is actually increasing.  
84 Report on a DG JRC-IPTS Workshop: "Raising Privat e Sector R&D in the New Member States: Does it 
help their economies catching up?" (Seville, 13.12.2007)  
 
EN 100   EN Figure 2 
Contribution of the ICT sector to total intensity (BERD / Value Added)  by Member State (2005)
0.0%0.5%1.0%1.5%2.0%2.5%3.0%
FI SE US DK AT IE DE FR NL EU27 BE UK SI EE CZ IT MT LU ES PT EL HU CY LT PL BG LV SK ROContribution of ICT sector to total economy research intensity Contribution of non-ICT sectors to total economy research intensity
 
Source: PREDICT 2009 Report 
The EU's main competitors (i.e. USA, Japan an d Korea) are investing significantly more in 
ICT R&D (relative to GDP) than the EU. The EU  and the US for example have similar GDP 
levels, but total R&D expenditure  in the ICT sector is twi ce as high across the Atlantic, 
creating a gap of €33 billion85. This difference can be attributed to lower ICT R&D 
expenditures by both the business sector and the public sector (Figures 3 and 4). 
Figure 3 
Contribution of the ICT sector to total BERD intensity (2005, %)
0.821.25
0.61
0.31
0.171.591.04
1.21
0.85
0.88
00.511.522.53
Japan Korea US EU27 Australia
contribution of ICT producing sectors to total BERD intensity contribution of non-ICT producing sectors to total BERD intensity
 
Source: PREDICT 2009 Report 
Regarding business R&D, the lower expenditure ra te is not necessarily a result of individual 
EU ICT companies spending less on R&D than th eir American counterparts. On the contrary, 
                                                 
85 Total R&D expenditure in the USA stands at € 68.5 billion, compared to € 35.9 billion in the EU27 (at 
purchasing power parity, 2005 figures) 
 
EN 101   EN the company R&D effort (intensity) is simila r for comparable EU and US firms in the 
different ICT sub-sectors86. The gap is primarily due to the smaller size of the EU ICT 
business sector relative to the US. 
Recent estimated data on public R&D funding (government budget appropriations or outlays 
on R&D — GBAORD)87indicate that EU governments account for only a relatively small part 
of ICT R&D. In 2005, their support to ICT R& D was €4.45 billion, well below the US figure 
of €10.58 billion. Moreover, the intensity was highe r in the latter country: in the US, public 
spending on ICT R&D stands at 0.10% of GDP, co mpared to 0.04% in Europe (Figure 4).  
Figure 4 
Public expenditure on R&D in billions of euro  and as share of GDP (%) (2005)
4.4510.58100.45
77.23
0.70.96
0.040.1
020406080100120
EU27 EU27 US US00.20.40.60.811.2
ICT targeted GBAORD non-ICT targeted GBAORD ICT targeted GBAORD/GDP non-ICT targeted GBAORD/GDP
 
Source: Predict 2009 - The R&D expenditure is plotted on the left axis, the GDP contribution on the right axis.  
Finally, according to Innovation Su rveys, the ICT sector is one  of the most collaborative 
sectors after energy an d chemicals industries. Among i nnovative ICT firms in four EU 
countries, about 34% engage in some type of collaboration for innovation (versus 24% of all 
firms), and 13% of ICT firms cooperate with universities and public research organisations 
(versus 8.5% of all firms).88 
9.2. ICT R&D investment trends by sectors 
9.2.1.  Methodology 
This section develops an analysis of R&D ba sed on spending data repo rted by companies in 
their annual reports. In general, this kind of data does not prov ide information about the place 
where R&D is actually performed.89 The most recent available data are the 2008 annual 
reports and the first quarter ly reports of 2009 (Q1 2009). 
                                                 
86 JRC-IPTS Reference Report "Mapping R&D Investment by the European ICT Business Sector" 
(Lindmark et al. 2008). Report available at http://ftp.jrc.es/EURdoc/JRC45723_RR.pdf 
87 JRC-IPTS Report: "The 2009 Report on R&D in ICT in the European Union" (Turlea et al.,2009). 
http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=2259 
88 OECD, using the 2007 European Community Innovation Survey 
89 The company’s whole R&D investment is attributed to the country in which it has its registered office. 
 
EN 102   EN The database that is used is the EU Industrial Investment Scoreboard. Th is database presents 
information on 2000 companies from around the wo rld on R&D investments. The set of 
companies it covers comprises the top 1000 R&D i nvestors whose registered offices are in the 
EU and the top 1000 registered elsewhere.90  
The 2008 EU Industrial Investment Scoreboard , covering fiscal year 2007, counts 187 EU 
ICT firms among the top-1000 R&D spending companies. They employ around 1 million 
person in total and invest € 26,240 million in R&D.  The most important ICT sub-sectors are: 
telecom equipment, telecom operators, semic onductors and software. Their R&D spending 
amounts to more than 90% of the ICT R&D tota l. The remaining ICT segments are computer 
services, internet, computer hardware and el ectronic office equipment, with significantly 
lower R&D rates. 
These figures reflect the strengths and w eaknesses of the European ICT industry. For 
example, there is little left of the computer ha rdware industry and Europe is nearly absent in 
the Internet industry, in wh ich companies like Google, Yahoo or MSN have acquired 
seemingly unchallengeable positions. The teleco m equipment industry is Europe's traditional 
ICT strength. Europe has also world lead ers in business and industrial software. 
The following analysis considers R&D spending by the top spending firms in the list of the 
Scoreboard in the four main ICT sub-sectors. The cut off date for firms' annual reports was 
fiscal year 2008 and for their quarterly reports was 1Q/2009. 
When interpreting these data, tw o important elements must be kept in mind: figures may be 
inflated by mergers and acquisi tions and all amounts are expre ssed in euro, meaning that 
exchange rate variations are changing the evol ution of the original data in the country's 
currency. Over the period 2000-2008, the euro consta ntly appreciated agai nst the dollar, by 
32% between January 2000 and December 2008. 
In the four main ICT segments R&D investment has increased by 11.4% in 2006, 12.5% in 
2007 and 2.9% in 2008 (Figure 5). Following the dotcom-bubble in 2001, total spending went down four consecutive years. Th e recovery star ted after 2005.  
                                                
 
90 http://iri.jrc.ec.europa.eu/research/scoreboard.htm   
 
EN 103   EN Figure 5 
R&D spending in millions of euro12,442
13,072
11,573
10,417
9,627
9,194
9,721
11,708
12,2183,520
3,544
3,369
3,386
3,721
3,908
3,985
3,975
3,9722,634
2,990
3,035
3,040
3,193
2,989
4,070
4,391
4,328 1,9401,7611,6351,3391,2411,2111,1301,1071,138
0500010000150002000025000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Telecom equipment Semiconductors Telecom operators Software
 
Source: Annual reports of a sample of the EU top ICT companies in R&D spending representing 90% of total 
R&D spending recorded by the 2008 Scoreboard 
Because of the economic downturn, 2009 is expected to feature a slowdown in R&D 
investment. The next sections ta ke a closer look at  R&D spending in the first quarter of 2009 
for each segment. 
9.2.2.  Telecom Equipment Industry 
The telecom equipment industry is  the largest segment of the IC T sector in terms of total 
R&D expenditure. It is also Europe's traditional ICT strength. In 2008, EU companies 
together had a 34% share of the fixed and IP infrastructure world-wide market and an 81% 
share in the mobile infrastr ucture world-wide market.  
Between 2000 and 2004, the European telecom e quipment industry, after reaching a peak in 
competitiveness due to the remarkable success of the GSM standard, saw a drop in sales and 
R&D following the crash of the dotcom bubble a nd less favourable economic growth (Figure 
6). 
 
 
EN 104   EN Figure 6 
 Evolution of the telecom equipment sector's  sales and R&D (Index 2000=100)
5060708090100110
2000 2001 2002 2003 2004 2005 2006 2007 2008 Sales R&D
 
Source: Annual Reports of the sample of Alcatel-Lucent, Ericsson, Nokia and Siemens COM, representing more 
than 90% of the EU Scoreboard samp le for the telecom equipment sector 
In the second half of the decade, the European telecom equipment industry went through 
important restructuring. In 2006, Ericsson acqui red assets of Marconi telecommunications 
operations and Alcatel and Lucent entered into a definitive merger agreement. In 2007, Nokia 
Siemens Networks combined Nokia’s networ ks business and Siemens’ carrier related 
operations for fixed and mobile networks.  
Between 2005 and mid-2008, world GDP expa nded vigorously offering new market 
opportunities in emerging and devel oping countries, fostering an ever increasing globalisation 
of the industry that extended its business outsi de the maturing telecommunications markets in 
the advanced economies and started experiencing new competitive pressure from Asian players.  
The restructuring of the teleco m equipment R&D activities has been globalised together with 
other operations of this industry. Today, Al catel Lucent R&D has approximately 23,000 R&D 
personnel (including Bell Labs), with a worl dwide presence in 23 countries and around 50 
major centres. The R&D workforce distribution is  continental: European Mediterranean Area 
39%; Americas 33%; Asia Pacific 28%. Nokia has R&D centres in 11 countries, employing 
14,500 people which represent approximately 32% of Nokia’s total workforce. Major R&D centres are located in various European c ountries, India and USA. Ericsson, with over 19,300 
people employed in R&D, has set up a network of research facilities and Centres of 
Excellence in Europe (Sweden, Ireland, Italy, Greece and Hungary), the Americas, India and 
China. 
R&D is increasingly devoted to improving users' experience. In its R&D orientations, Alcatel-
Lucent is adopting a user-centric approach — putting the end user at  the centre of all activities 
— a critical component in a serv ice provider’s ability to stay competitive, create services and 
generate profitable growth. Nokia's new user in terface research, located in Europe and in the 
United States, with teams in China, India, and Africa also focuses on a user experience that 
meets cultural preferences.  
 
EN 105   EN The current economic deterioration is affectin g the telecom equipmen t industry (Figure 7). 
The handset business saw a dramatic decline in  consumer demand for handsets and a massive 
de-stocking starting in the four th quarter of 2008 and extending into the first quarter of 2009. 
The turn in the inventory cycle is generally expected to be reached in the next quarter.  
The effects of the global economic recession on investment in networks remain difficult to 
predict. Nokia and Nokia Siemens Networks e xpect the mobile infrastructure and fixed 
infrastructures and related services market to decline approximately 10% in euro terms in 2009. Alcatel-Lucent expects the global telecommunications equi pment and related services 
market to be down between 8% and 12% at cons tant currency in 2009. According to Ericsson, 
investment in wireless networks largely cont inues, and rollouts of new networks and new 
technologies accelerate in markets such as the US, China and India.  
The combined R&D spending in fiscal year 2008 of Nokia, Alcatel-Lucent and Ericsson 
amounted to €12.2 billion, an increase of 4.3% comp ared to the previous year, but also an 
increase lower than the previous year. The first quarter of 2009 saw a significant drop in sales, mostly explained by the mobile  handset business, and for mo st companies also in R&D. 
Among the European and US global telecom equipment companies, only Nokia and Qualcomm reported an increase in R&D.
91  
Figure 7 
Cumulative Sales and R&D, at constant exchange rate, 
of Nokia, Alcatel-Lucent, Ericsson*, Motorola, Cisco and Qualcomm
-13.9%-2.6%
-0.16-0.14-0.12-0.1-0.08-0.06-0.04-0.020
Sales R&D
 
Source: Financial Reports 
The R&D intensity in the telecom equipment industry is among the highest in the ICT sector, 
reaching 16% for Nokia Siemens Networks, Alcat el-Lucent and Ericsson in fiscal year 2008. 
R&D spending is decreasing less than sales: in  1Q/09, the R&D intens ity increased to 19% 
for Nokia-Siemens and Alcatel-Lucent. 
                                                 
91 The 50/50 joint venture between Ericsson and STMicroelectronics, merging STMicroelectronics’ 
wireless business and Ericsson Mobile Platforms, started operations in February 2009 making it 
impossible to compare 1Q/09 with  1Q/08. Between 4Q/08 and 4Q/07, Ericsson's R&D increased by 
3%.  
 
EN 106   EN 9.2.3.  Telecom operators 
The R&D intensity in the telecom service segment is very low, in general less than 2%, 
following a shift from R&D conduc ted by the previous  public monopolies to R&D mostly 
conducted by equipment suppliers. Recently, the emergence of the Web 2.0 and Enterprise 2.0 
services is the driving need for increasing a nd re-focusing R&D. The seven largest operators' 
92 R&D spending reveals a significant increas e in R&D between 2005 and 2008 (Figure 8).  
Figure 8 
Evolution of the telecom operators sector's  sales and R&D (Index 2000=100)
6080100120140160180
2000 2001 2002 2003 2004 2005 2006 2007 2008Sales R&D
 
Source: Annual Reports of a sample that consists of 7 largest telecom operators, representing more than 90% of 
R&D spending recorded by the EU Scoreboard for this industry 
The increase in R&D spending since 2005 is explained both by a si gnificant increase in 
capitalised software development costs93 and by the fact that be fore 2005 telecom operators 
did not mention capitalised software as part  of their R&D spending. These investments are 
primarily related to the development and adaptation of internally developed software, as well as software platforms and architectures, with the aim of improving processes for the provision 
and operation of services and products. Developm ent costs for software can be important in 
the total R&D budget. Not all te lecom operators however dist inguish between operational 
R&D and software R&D. 
Operators are also following the same trend as  equipment manufacturer s and orienting their 
R&D to services and end-users centric goals  and the overall R&D intensity will most 
probably increase in the coming years. Examples  are: Deutsche Tele kom Laboratories’ was 
founded in 2005 and its major fields of focus in clude: intuitive usabilit y, the integration of 
different media and devices, facilitating access, improving security and setting up high-
performance networks. Telefónica I+D has become the largest private R&D centre in Spain. It 
has set up an international network connect ing more than 150 universities and several 
                                                
 
92 Corresponding to 90% of total R&D spending as reported by the 2008 EU Scoreboard for this sector 
93 In accordance with the international accounting standard IAS 38 "Intangible Assets", R&D expenses are 
recorded as expenses in the year in which they  occur, except for development costs which are 
capitalised when several criteria are met. Capitalised software developments ar e those incurred during 
the programming, codification and testing phases. Costs incurred during the design and planning, 
product definition and product specification stages are accounted for as expenses. 
 
EN 107   EN hundreds of organisations in 42 countries worl dwide. France Telecom set up in 2006 Orange 
Labs, with a staff of 3,800 re searchers in 18 laboratories. 
Too few telecom operators in the sample releas e their R&D spending in the quarterly reports 
and the impact of the crisis on their R&D dur ing the first quarter of  2009 cannot be assessed. 
9.2.4.  Semiconductors Industry 
Semiconductors were first developed in the United States (Bell Labs, Fairchild, Texas 
Instruments). The European semiconductor indu stry developed mainly under the protective 
umbrella of conglomerates that ultimately decided to spin-off their semiconductor business units. Semiconductors in mobile  communications and embedded in final goods such as cars 
provided new market opportunities. At the begi nning of the new millennium three European 
chip companies were in the global top ten. 
The development of semiconductors relies on in teractions and colla borative relationships 
between the manufacturer, the semiconductor equipment and materials industry and R&D 
research centres. Although its manufacturing worl d share declined, Europe  has a world class, 
innovation eco-system in semiconductors, with a few dedicated regions with a critical mass 
and specific semiconductor competences such  as Dresden, Dublin, Eindhoven, Leuven and 
Grenoble. These clusters are key assets for th e competitiveness of the European industry and 
address all application fields. European public-p rivate R&D partnerships  are also considered 
the best in the world, although they would benef it from more efficient commercialisation of 
their R&D. The semiconductor industry has the highest R&D intensities of all ICT sectors. 
For fiscal year 2008, the R&D in tensity of European semiconductors firms was about 22% for 
NXP, 21% for STMicroelectronics, 17.5% for Infineon and 18% for ASML (semiconductors 
equipment). 
As semiconductors are intermediate goods, the indus try is structurally hi ghly cyclical and has 
been subject to significant economic downturns at various times. The industry is also 
characterised by continuous tec hnological progress in  the manufacturing of semiconductors 
(Moore's Law) which leads to transitional excess supplies.  
The semiconductor industry has the highest R&D intensity of all ICT segments. R&D 
spending went down 5% after the dotcom bust in  2001, as a result of a major fallback in the 
demand by other industries. Th e sector however recovered quickly. During the last years, 
R&D amounts remained relatively stable, and th ere was no dramatic decline in 2008 despite a 
significant decline of its  revenues (Figure 9).  
 
EN 108   EN Figure 9 
Evolution of the semiconductor industry's  sales and R&D (Index 2000=100)
60708090100110120
2000 2001 2002 2003 2004 2005 2006 2007 2008
Sales R&D
 
Source: Annual Reports STMicroelectronics, Infineon, Qimonda and NXP  
Despite recent stability, when the financial cris is extended to the real economy in the fourth 
quarter on 2008, the semiconductor market collap sed in a way never e xperienced before as 
reflected by the negative results in Q1 2009 report s (Figure 10). During the fourth quarter of 
2008 and the first quarter of 2009, the utilisation rate of semiconductor facilities was at an 
historical low and led to important losses (Fig ure 11). Hopefully, as for mobile handsets, a 
turn in the inventory cycle seems to be in vi ew, although the level of de mand is still uncertain. 
Figure 10 
Cumulative Sales and R&D, at constant exchange rate, 
of NXP, STM, Infineon, Intel, AMD and Texas Instruments
-30.6%-13.8%
-0.35-0.3-0.25-0.2-0.15-0.1-0.050
Sales R&D
 
Source: First Quarter 2009 Financial Reports 
 
EN 109   EN Figure 11: Utilisation rate of semico nductor manufacturing facilities (%) 
 Utilisation rate of semiconductor manufacturing facilities (%)
6065707580859095100
1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 
Source: OECD, 2009 
9.2.5.  Software 
This section is about the softwa re industry defined as an activ ity producing a software original 
that is reproduced and sold, some are package d, some are customised and some are linked to 
complementary services. Inevitably, the grouping is heteroclite, including games, manufacturing tools (computer aided design and manufactur ing), business and internet 
software.
 94 
This industry is highly fragmented. In 2005, there were an estimated 18,000 European 
packaged software companies.95 Most of these had less than 15 employees and €1 million in 
revenue. This market fragmenta tion contrasts with the fact th at R&D is highly concentrated. 
The EU Scoreboard, which shows that total R& D expenditure in the software industry in 
Europe, rose 14% per year (Table 1). This is slightly higher than  in other parts of the world. 
Moreover, R&D intensities in Europe and in the rest of the world are roughly similar, 
suggesting that the European soft ware sector is growing at a fa ster pace than elsewhere.  
Table 1: Software R&D in 2007  
 Changes in R&D 
investment 
2007-2006 (%) R&D CAGR* 
(2004-2207) 
(%) R&D intensity 2007 
(% R&D/Sales) 
 EU Non-EU EU Non-EU EU Non-EU 
Software 14.7 12.6 14.0 12.1 15.0 14.5 
* Compound Annual Growth Rate  
Source: EU Industrial Investment Scoreboard 
                                                 
94 It should be reminded that an important part of R&D expenses are in fact own-account software 
developments. Indeed, in services as well as in ma nufacturing industries, much research relies on or 
results in new software. Eurostat and the OECD are currently and jointly implementing a new method 
for measuring R&D investment in software (SNA93 - Revision of the system of national accounts) 
95 IDC figures 
 
EN 110   EN According to the Scoreboard, total R&D expend iture by the European software industry in 
2007 was around 4 billion. The 3 biggest companies (SAP, Dassault Systems and UbiSoft) are responsible for half of that amount, while the 11 biggest companies account for 71%. Within 
these 11 companies, 7 provide business solutions, while the others produce software for 
entertainment purposes (i.e. mainly games). Grow th of their combined R&D expenditure over 
the period 2004-2007 is si gnificant (Figure 12).  
Figure 12 
The software industry's R&D spending (millions of euro)
1,6711,8422,1192,351217232323430
05001,0001,5002,0002,5003,000
2004 2005 2006 2007Business Software Entertainment software 
Source: Scoreboard 2008 
Although total R&D spending is lower for the en tertainment companies, their R&D intensity 
is generally higher: with 33.6%, it largel y exceeds the 14.1% for business software 
companies. The gaming industry is typically ch aracterised by a constant need for innovation: 
as hardware becomes more powerful and cheaper, the demand for cutting-edge graphics and improved features booms, forcing the developers to constantly invest in R&D in order to 
insure competitiveness.  
9.2.6.  Internet companies 
The search engines, social networks and web mail services that are shaping the Internet are of 
US origin. The 2008 Scoreboard does not iden tify any single major EU firm providing 
Internet related utilities (email, search engi nes, social networks).  Two firms, Google and 
Yahoo, account for 88% of R&D carried out by Internet companies. Their R&D spending is in line with revenue performa nce over the relevant period.  
 
EN 111   EN Figure 13 
R&D expenditure by the two major Internet companies (millions $)
050010001500200025003000
2004 2005 2006 2007 2008
Google Yahoo!
 
Source: Annual Reports 
9.3. Conclusions 
Technological innovation in the ICT sector is an  important driver of productivity growth. The 
cyclicality of R&D investment and the preliminar y evidence of its decline illustrated in this 
chapter may have important repercussions on the ability of the EU to sustain an acceleration in productivity growth and stimulate a durable recovery. Recovery stra tegies based on broad 
innovation strategies would help foster long- term growth. The EU stimulus packages do 
recognise the importance of ICT R&D and inn ovation for the competitiveness of the whole 
economy and for its ability to addres s the key societal challenges ahead. 
The European Economic Recovery Plan pr oposed by the Commission on 26 November 2008 
includes public-private partnerships for research and development in three initiatives aimed to 
develop new technologies for th e manufacturing, construction and automotive sectors. ICT 
plays an important role  in all three areas:  
- In the Factories of the Future initiative, concerning innovation in modern manufacturing, 
ICT provides essential tools to face today's industrial challenge s such as increasingly global 
networked operations, more agile manufacturin g and customisation, lower carbon emissions 
and energy efficiency as well as optimised  design of manufacturing systems and better 
process life cycle management.  
- In the 'Energy-Efficient Buildings' initiative,  ICT helps to improve energy efficiency in 
buildings through, for example, better monito ring and control of energy consumption, 
advanced lighting systems, and smarter and optim ised interconnections with the power grids. 
- In the 'Green Cars' initiative, ICT is essential for de veloping fully electrical vehicles, e.g. for 
battery management and power supply, for cont rol mechanisms and for the interconnections 
with the transport and power infrastructures. 
With ICT underlying innovations in  all businesses, it is only through the development of a 
solid ICT-knowledge base and by shaping its deve lopment that Europe will be able to make 
the best of the technolo gy throughout its economy.