Commission staff working document accompanying document to the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Europe's Digital Competitiveness Report : volume 1- i2010 : Annual Information Society Report 2009 - Benchmarking i2010 : Trends and main achievements {COM(2009) 390 final} {SEC(2009) 1060} {SEC(2009) 1104}
Date: 2009-08-04
Institutions: European Commission
Subjects: EU programme, activity report, digital technology, disclosure of information, information processing, information system, information technology, new technology, radio telecommunications

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.8.2009 
SEC(2009) 1103 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying document to the  

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Europe's Digital Competitiveness Report  

Volume 1: i2010 — Annual Information Society Report 2009 
Benchmarking i2010: Trends and main achievements  

{COM(2009) 390 final} 
{SEC(2009) 1060} 
{SEC(2009) 1104} 

ELECTRONIC VERSION ONLY 

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Executive Summary ................................................................................................................... 5 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

2.8. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

5. 

The Broadband Economy.......................................................................................... 8 

Penetration of fixed broadband access between 2003 and 2009: Reducing the 
broadband gap .............................................................................................................. 8 

Broadband coverage: Towards broadband for all ...................................................... 10 

Increased competition brings higher speeds at lower prices...................................... 12 

Indexing Broadband Performance in 2009 ................................................................ 14 

Conclusions ................................................................................................................ 16 

Regular Internet usage and the eInclusion puzzle: Tackling digital divides...... 21 

Regular internet use in the EU and its Member States............................................... 21 

Disparities in regular internet use across socio-economic groups and the Riga goals
.................................................................................................................................... 22 

Barriers to household take up of the internet ............................................................. 25 

Barriers to broadband take-up.................................................................................... 27 

Results of econometric studies................................................................................... 28 

Disparities in Digital Literacy.................................................................................... 30 

The emerging Second Digital Divide......................................................................... 32 

Conclusions ................................................................................................................ 33 

The impact of ICT on Social Capital...................................................................... 35 

ICT and social capital................................................................................................. 35 

A typology of internet use.......................................................................................... 37 

Perceptions about the social impact of ICTs.............................................................. 39 

Conclusions ................................................................................................................ 42 

The Internet as a Communication tool................................................................... 43 

How do Europeans use the internet to communicate? ............................................... 44 

Does the Internet replace other means of communications?...................................... 46 

Youngsters are the most intensive internet users ....................................................... 49 

The mobile phone for advanced communication services: An emerging service...... 51 

Conclusions ................................................................................................................ 54 

The use of the Internet for entertainment purposes and its impact on content 
markets...................................................................................................................... 56 

5.1.  Willingness to pay for content ................................................................................... 57 

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5.2. 

5.3. 

New content and new platforms for exchange: User Created Content ...................... 59 

The use of the internet for entertainment purposes and to replace other means of 
communications: a challenge for 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. 

6.1. 

6.2. 

6.3. 

ICT uptake by European businesses and productivity impacts .......................... 70 

Developments in ICT uptake by EU businesses ........................................................ 70 

Supply chain management ......................................................................................... 72 

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. 

7.1. 

7.2. 

Developments in National ICT policies .................................................................. 78 

Overview of main ICT policy priorities and developments across Member States... 78 

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 

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9.2. 

ICT R&D investment trends by sectors ................................................................... 101 

9.2.1.  Methodology ............................................................................................................ 101 

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 .............................................................................................................. 111 

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EXECUTIVE SUMMARY 

The  i2010  initiative  is  successfully  meeting  its  challenges  and  delivering  on  its  promises. 
Take up of ICT by European enterprises and citizens has risen substantially over the past few 
years  and  the  rapid  spread  of  broadband  is  stimulating  a  more  intensive  use  of  advanced 
internet services. The quality of access has improved 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,  including  those  belonging  to  more  disadvantaged 
social  groups.  Use  is  becoming  more  interactive  and  sophisticated  and  the  internet  has 
become  a  popular  tool  for  communication  and  entertainment  services.  This  report  analyses 
developments  in  Europe's  information  society  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  communications (Chapter 1). With 114 
million subscribers, the EU is the largest world market for fixed broadband access with fast 
growth  in  penetration  rates.  Half  of  European  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). Broadband 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 recovery, reiterated the importance of ensuring broadband for 
all  in  the  near  term.  Several  initiatives  have  been  announced  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 rapid change in habits and 
in the adoption of new ways of communicating and sharing information (Chapters 4 and 5). In 
2008,  35%  of  Europeans  declared  using  the  Internet  for  advanced  communication  services, 
i.e. those services that go beyond the one-to-one communication systems and make possible 
the  distribution  and  sharing  of  online  information,  content  and  applications.  Although  these 
services do not yet replace traditional 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  those  aged  16  to  24,  stand  out  as  the  most 
regular,  intensive  users.  73%  of  them  have  used  the  internet  in  the  last  three  months  for 
advanced communication services, more than twice 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 active users to download, exchange, create and re-
create,  distribute,  share  and  re-use.  This  is  confirmed  by  the  rise  in  social  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 significance 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.  

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Continued  increases  in  usage  however  have  not  yet  compensated  for  certain  take-up  gaps. 
While  broadband  is  available  to  more  than  90%  of  EU  population,  effective  take-up  attains 
50%  of  households.  The  main  reasons  why  households  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 third of European citizens have never used the 
internet.  Large  gaps  in  internet  usage  are  observed  both  across  countries  and  across  socio-
economic groups. Digital inclusion is largely driven by age and education/income levels: In 
most  countries,  the  largest  disparities  in  internet  use  relate  to  groups  aged  65-74,  the 
economically inactive and the low educated (Chapter 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 benefits, facilitating access for the old and the 
disabled,  reducing  financial  barriers  and  encouraging  the  acquisition  of  skills  and  life-long 
learning. Although most of these disparities are due to disappear naturally with the ageing of 
the "digital natives", the introduction of new technologies and devices 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  fostering  ICT  take-up  by  businesses  should 
remain mainstream. While take-up of efficiency enhancing technologies by large enterprises 
is widespread, SMEs are often lagging behind. Use of key business applications such as RFID 
is  increasingly  extensive  for  inventory  management  systems  but  also  for  the  labelling  of 
single product items. Innovative wireless technologies will play a more and more important 
role in the delivery of productivity gains for the 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 innovative and is being impacted by the economic crisis, albeit less 
than  other  sectors  of  the  economy.  While  the  downturn  is  expected  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 ICT 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 otherwise mature markets. The internet industry, on 
the other hand, is weathering the storm better than any other part of the sector (Chapter 8). 

The  ICT  sector  is  the  biggest  R&D  investing  industrial  sector  and  provides  other  industries 
with  productivity  enhancing  technologies.  Firm-level  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 constraints have resulted in 
R&D investment declining pro-cyclically (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 ensure a sustainable long-term recovery.  

In  the  context  of  i2010  ICT  policies  have  been  mainstreamed  and  have  already  produced 
tangible  outcomes  in  terms  of  take-up  by  both  citizens  and  enterprises  (Chapter  7).  In  the 
future, national ICT policies need to build 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. The digital revolution is a 
prime driver of economic growth and social change. 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 

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important  that  this  key  role  of  ICT  is  not  forgotten.  Investments  in  ICT  are  'smart' 
investments; helping to create and maintain jobs and growth now, to emerge from the crisis 
stronger  and more  quickly, while at the same time  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 future – a smart grid, broadband for all and better 
health care – as we do in more traditional infrastructure.  

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1. 

THE BROADBAND ECONOMY 

Broadband is the basic infrastructure of modern 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 European Information Space offering affordable 
and secure high-bandwidth communications. Fast broadband access was then considered one 
of  the  main  challenges  posed  by  digital  convergence,  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  Information  Society  that  provides 
high  quality  public  services  and  promotes  quality  of  life.  Digital  convergence  offers  new 
opportunities but also brings new challenges, including the risk of a widening digital divide. 
i2010 aimed at expanding the geographical coverage of broadband to under-served areas. 90% 
of broadband coverage was one of the main objectives agreed by ministers in Riga1 in 2006 
and was already achieved by the EU25 in 2007. "Broadband 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 development 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 rural areas, i2010 insisted on the 
importance of making sure that remote and less populated regions were not left behind. 

This  chapter  analyses  the  main  developments  in  broadband  in  recent  years,  focussing  on 
performance indicators such as penetration, coverage, speeds and prices. It concludes with an 
update of the Broadband Performance Index, assessing the main strengths and barriers of EU 
Member States to continue progressing in the broadband economy.  

1.1. 

Penetration of fixed broadband access 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  rates  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 internet households had a broadband connection. 
The percentage of enterprises connected to broadband has increased from 46.5% in 2004 to 
81% in 2008.  

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3 

of 

the 

Riga 

declaration 

the  ministerial 

Proceedings 
and 
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 
More information can be found at  
http://ec.europa.eu/information_society/eeurope/i2010/digital_divide/index_en.htm#Broadband_Gap_P
olicy 
More information is available at 
http://europa.eu/rapid/pressReleasesAction.do?reference=DOC/09/1&format=HTML&aged=0&langua
ge=EN&guiLanguage=en 

available 

are 

at 

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The  EU  fixed  broadband  penetration  rate  (number  of  fixed  broadband  lines  per  100 
inhabitants,  including  both  households'  and  enterprises'  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 importance in the last couple of years as an alternative way for EU consumers 
to  benefit  from  this  service,  even  though  in  general  mobile  technologies  currently  allow 
transmission speeds below those of wired technologies4.  

EU Broadband penetration, January 2009

Figure 1 

40

35

30

25

20

15

10

5

0

SK BG RO PL

EL HU PT CZ

LV

LT CY

IT

IE

ES

SI

AT EU27 MT EE BE DE FR UK LU

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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 the maximum and the minimum penetration rates 
increased in the aftermath of the 2004 enlargement of the EU to reach its peak at the end of 
2007, when the difference between the countries with 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  the  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 countries also came down5.  

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Reliable and meaningful data on effective wireless broadband lines are however not fully available and 
the Commission is working to improve this side of the i2010 benchmarking framework.  
Dispersion  of  values,  which  increased  in  2007  with  the  entry  of  BG  and  RO,  also  decreased 
significantly in 2008.  

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Figure 2 

40

35

30

25

20

15

10

5

0

19.2

8.6

0.1

2005

The gap in broadband penetration in the EU

35.6

20

31.9

16.3

25.2

12.8

37.3

22.9

10.9

0.5

1.4

7.6

4.4

2006

2007

2008

2009

Highest - lowest broadband penetration rate

Broadband gap 

EU fixed broadband penetration 

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 off, 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 Netherlands and Denmark. On the other hand, countries with fewer 
broadband  lines  have  experienced significant  growth  rates  over  the  last  year  –  7  percentage 
points  in  Malta,  and  more  than  4  in  Poland,  Cyprus,  Greece  or  Lithuania.  Yet  this  positive 
development did not suffice to curve the decline 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 broadband, 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 Internet6.  

1.2. 

Broadband coverage: Towards broadband for all 

Avoiding a new digital divide - broadband have and have-nots - is another important objective 
of i2010. Broadband allows individuals and organisations to communicate and access services 
regardless  of  their  geographical  location.  It  enables  businesses  to  communicate  with  clients 
and suppliers and limits business migration to urban areas. Broadband allows 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  particularly  beneficial  to  the  development  and  attractiveness  of 
remote  and  rural  areas.  Nevertheless,  broadband  roll-out  has  been  concentrating  in  more 
populated areas because of high investment costs due to distance and population scarcity.  

6 

Source: Eurostat 

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Broadband access can be provided through different technologies, either wireline or wireless. 
As the footprint of the traditional telephone network, 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 well 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 orography and distribution of population in some 
countries, 100% coverage of wired networks will probably never be reached. Currently, only 
smaller and flat countries like Luxembourg, Denmark, the Netherlands and Belgium exhibit 
100%  rates  of  rural  coverage.  Several  countries  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  differences  between  countries  in  2005  have 
been levelled  off  over time (Figure  3),  increasing 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. Significant progress has also been 
made by Slovenia, Cyprus, Poland and Slovakia.  

Figure 3 

0.95

0.85

0.75

0.65

0.55

0.45

0.35

Growth in DSL national coverage in the EU, 2005-2008 (in % of total population)

0.92

0.92

0.925330832
0.922

0.93

0.932

0.939

0.94

0.91

0.9

0.87958557

0.86

0.85

0.95

0.95

0.957

0.958

0.96

0.979

0.969

0.99

0.99

0.998

1

1

1

1

0.779284934

0.6963575

0.35

0.5546928920.607423949

0.85

0.8230.8223020710.75

0.55

0.860.8738395660.89

0.697

0.9

0.85

0.920.8699664480.9040.8840712460.926

0.920.9348900110.99

0.99

0.994681077

0.963971287

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 LU

2005

2008

Source: IDATE7 

Extension of broadband coverage in rural areas is more uneven and can still be considered a 
policy challenge in several countries where broadband access is available to less than 50% of 
rural  population.  Progress  at  EU  level  has  been  slower  than  for  national  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  technologies  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 

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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 but especially wireless 
technologies  such  as  UMTS  (3G),  WiFi  and  WiMax  and  to  a  certain  extent  satellite  have 
made  their  inroads  into  the  broadband  market.  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 use in order to ensure universal availability. 
Fully comparable data on wireless broadband coverage are not yet available. The Commission 
has  launched  a  study  to  gather  further  information  on  the  actual  coverage  of  wireless 
broadband  networks  as  this  form  of  access  is  becoming  increasingly  common  in  some 
Member States. 

Figure 4  

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Growth in DSL rural coverage in the EU (in % of total population)

0.99

0.99

0.994

1

1

1

0.9

0.9

0.9

0.91

0.94

0.87

0.85

0.86

0.88

0.818

0.8

0.82

0.83

0.77

0.75

0.7

0.68

0.5

0.5

0.4250.434791254

0.25

0.35 0.249925708

0

0.6639996180.546

0.565

0.67

0.76 0.445863619 0.27

0.79

0.79

0.82

0.78

0.66

0.55 0.8266923120.878512615 0.99

0.9487

1

1

1

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 LU

2005

2008

Source: IDATE 

1.3. 

Increased competition brings higher speeds at lower prices  

The  average  download  speed  of  broadband  subscriptions  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 above 2 MB/s, a three fold increase relative to 
2005.  This  increase  in  speed  has  driven  (and  has  been  driven  by)  growth  in  the  use  of  new 
services  which  has  enabled  the  rise  of  the  Web  2.0.  Speeds  are  expected  to  continue 
increasing  as  high  definition  video  and  IPTV  become  widely  used,  fast  downloading  and 
uploading  requirements  increase  and  shared  internet  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  Europe  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 provided speeds in excess of 30 Mb/s (Figure 
5). 

EN 

12 

   EN 

 
 
Subscribers by download rates in the EU (DSL, cable modem and FTTH)

Figure 5 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

 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 price comparisons are complex tasks because 
product  characteristics,  usage  conditions  and  quality  of  service  greatly  differ  across  offers, 
data indicate that the average price for a broadband standalone service 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  affordable  prices,  significant  differences  between 
countries still exist and the price 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

120

100

80

P
P
P

/

60

40

20

0

SE RO DK

NL

SI

HU

IE

LT

EE

LU

EL

FI

NO BG LV

PT

BE

AT

CZ

SK

PL

CY

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 broadband access costs are available at  

EN 

13 

   EN 

 
 
€
 
                                                 
These  positive  trends  on  speeds  and  prices  are  the  outcome  of  a  regulatory  framework  for 
electronic  communication  services  focused  on  opening  up  competition,  encouraging  lower 
prices  and  investment  and  greater  choice  for  consumers.  The  regulatory  framework  has 
imposed obligations on the former telecom national monopolies in order to facilitate the entry 
in  the  market  of  new  providers  of  electronic  communication  services  so  as  to  create 
competitive dynamics. The market share of the new entrants has steadily grown over the last 
years and new operators now sell 54% of all broadband lines, up from 44% in 2004. However, 
this trend came to an end in 2008, a year in which former incumbent operators on average just 
lost  0.4%  of  the  market  share  and  actually  increased  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 resulted in significant level of investment in 
the  broadband  networks,  both  by  incumbent  and  new  operators.  It  has  also  brought  about 
innovation and delivered more choice 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  broadband  access  exclusively.  In  2008  use  of  mobile 
broadband  for  value  added  services  have  started  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 
200810, following consultation with Member States. The BPI is used to measure the relative 
performance of countries in the wide broadband economy; to identify relative weaknesses and 
strengths  of  individual  countries  to  fine-tune  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 advanced services and socio-economic 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.  Recognition  of  barriers  to  further  developments 
for example facilitates the design of policy responses. By summarising the various dimensions 
that  characterise  broadband  economies,  the  BPI  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 
http://ec.europa.eu/information_society/eeurope/i2010/bpi/index_en.htm 

14 

   EN 

10 

EN 

 
                                                                                                                                                         
 
Given  the  changing  nature  of  the  broadband  economy,  including  changes  in  consumption 
patterns, availability of offers and technological take up, the composition of the BPI has been 
slightly modified relative to 2008 (see the annex at the end of this section). 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  than  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  effective  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  those  with  the  highest  broadband 
penetration rates. 

The second group of countries is characterised by having good scores in all dimensions except 
for  one  or  two.  For  instance  prices  are  relatively  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 terms of broadband penetration rates. 

In countries with lower scores there are imbalances in the performance of different indicators. 
Finland  and  Luxembourg,  for  instance,  which  are  the  countries  with  the  fourth  and  fifth 
highest  broadband  penetration  rates  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  similar  broadband  penetration  levels  at  around  17%  of  their 
population.  Very  low  ranking  in  particular  dimensions  (competition  and  prices  in  Spain  or 
speed in Malta and Slovenia) combined with medium socio-economic context and take-up of 
services  brings  these  countries  to  their  lower  position.  Other  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  speeds,  low  competition  levels  or  low  take-up  of 
services.  

Poland, Greece, Bulgaria and Romania are still severely 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 Bulgaria, where brand new infrastructure is 
being deployed in the absence of traditional telephone networks, display good scores in speed 

EN 

15 

   EN 

 
and prices. Cyprus has the lowest scores in competition levels, price and speed. The ranking 
of all these countries, which have the lowest broadband penetration levels, is also negatively 
affected by low rates in the adoption of advanced services and by the socio-economic context. 

Broadband Performance Index, July 2009 

Socio-economic context

Take up of advanced services

Speeds

BB price

BB competition*coverage

BB coverage in rural areas

Figure 7 

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

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 SE

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 connection, 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 EU25 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 economic recovery and close the gaps in European 
broadband  coverage,  the  European  Economic  recovery  package  has  earmarked  more  than  1 
billion  euros  for  the  development  of  broadband  communications  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  targeting  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 chapter, 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  encourage  broadband  adoption.  As  availability  of 
broadband now remains an issue only in limited parts 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 should help furthering citizens' uptake. 

EN 

16 

   EN 

 
 
Annex: Composition of the BPI and detailed results by dimensions 

RURAL COVERAGE 

BB coverage in rural areas 

COMPETITION BY 
COVERAGE 

BROADBAND PRICE 

SPEEDS 

TAKE-UP OF 
ADVANCED 
SERVICES 

SOCIO-ECONOMIC 
CONTEXT 

PLATFORM COMPETITION
*NATIONAL COVERAGE 

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) 

PC PENETRATION AND USE OF 3G  

EN 

17 

   EN 

 
 
 
BB rural coverage (0 to 1)

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

BG

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

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

1.00

BB competition and coverage (0 to 1)

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

Platform competition * 
National coverage

CY

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

0.000 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 0.879 0.884 0.923 1.000

EN 

18 

   EN 

 
 
 
 
 
 
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

BB price. Median offer. 
Basket 4Mbs-8 Mbs 

BB price. Median offer. 
Basket 2Mbs-4 Mbs 

Median of price/speed

BB price (0 to 1)

BB price. Median offer. 
Basket 4Mbs-8 Mbs 

BB price. Median offer. 
Basket 2Mbs-4 Mbs 

Median of price/speed

CY

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

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

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

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 0.536

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

% of subscribers to products 
with speeds above 2 Mbs

Average Speed

Speeds (0 to 1)

% of subscribers to products 
with speeds above 2 Mbs

Average Speed

CY

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

0.000 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

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 0.538

EN 

19 

   EN 

 
 
 
 
 
 
 
 
Take up of advanced services  (0 to 1)

e-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

RO 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

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

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
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
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

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

Software downloading by individuals

e-Government by individuals

e-Government by enterprises

e-Invoicing by enterprises

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

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

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 0.158

Socio economic context  (0 to 1)

% of the pop. using a mobile phone via UMTS (3G) to
access the Internet

Household PC penetration

% of population with some internet skills

RO 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

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

% 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
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

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

Household PC penetration

% 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 0.37

EN 

20 

   EN 

 
 
 
 
 
 
2. 

REGULAR  INTERNET  USAGE  AND  THE  EINCLUSION  PUZZLE:  TACKLING  DIGITAL 
DIVIDES 

One  of  the  goals  of  i2010  was  to  promote  a  more  inclusive  information  society.  The  Riga 
Ministerial Declaration of 2006 set a number of targets with regard to improving eInclusion. 
They  included  the  halving  of  disparities  in  regular  internet  use  and  digital  literacy  between 
disadvantaged groups and the EU population as a whole between 2005 and 2010. 

This chapter looks at progress made in reducing disparities 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 suggestions for future policy directions in the area 
of eInclusion. 

The results show that regular internet use has grown substantially, 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 remain, across countries and 
socio-economic  groups,  and  a  second  digital  divide,  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  influence  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  the  old  and  disabled,  reducing  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 increased markedly over the lifetime of the i2010 
initiative. On average regular internet use, defined 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 has 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 

21 

   EN 

 
Figure 1 

8
0
0
2

s
r
e
s
u
t
e
n
r
e
t
n

i

r
a
l
u
g
e
r

%

100

90

80

70

60

50

40

30

20

10

0

Trend in % Internet regular users in the EU, 2005-2008

is

se
dk

nl

ee

ro

pt

it
cy

bg

fi

uk

at

no

si

mt

be

eu27

lu

de

es

pl

gr

sk

lt

lv

hu

fr

ie

cz

0

5

10

15

20

25

30

Increase in regular internet use 2005-2008 (percentage points)

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

Regular internet usage has risen in all EU 27 Member States and in 17 European countries at 
least half of the population are now regular internet users. The countries showing the biggest 
increases since 2005 are Ireland, the Czech Republic, France, Hungary, Latvia, and Lithuania. 
The countries with the least improvement are Iceland, Denmark, Sweden, Romania, Estonia, 
the  Netherlands,  Italy,  Cyprus  and  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  Italy,  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, these countries are being left behind. The two main 
exceptions  are  Ireland  and  the  Czech  Republic  which  have  improved  their  positions 
significantly. 

2.2. 

Disparities  in  regular  internet  use  across  socio-economic  groups  and  the  Riga 
goals 

While progress in reducing disparities 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/information_society/events/ict_riga_2006/index_en.htm. 

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of disparities in internet use and digital literacy between disadvantaged groups12 and the EU 
population as a whole between 2005 and 2010.13 

To  monitor  disparities  in  internet  use  and  digital  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 literacy will be dealt with later. 

The index of regular internet use has increased to 0.66 in 2008, from 0.60 in 2005, showing a 
marked  improvement  (Figure  2).  The  disadvantaged  groups  which  have  made  the  best 
progress are the low educated (+0.1 p.p.), inactive and aged 55-64 (+0.08 p.p. each). The least 
progress was made in the group of individuals living in sparsely populated 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,  they  remain  to  a  large  extent 
digitally  excluded.  In  contrast,  the  category  women,  whose  starting  position  was  not  that 
different from the average, has already achieved its Riga target.  

Figure 2 

1

0,9

0,8

0,7

0,6

0,5

0,4

0,3

0,2

0,1

0

Internet regular use disparity indicator EU
(1= % of regular internet users in the total population). 

disadvantaged groups  
index value at 0,66 in 2008

disadvantaged groups  
index value at 0,60 in 
2005

aged 55-64

aged 65-74

women

low educated

inactive

unemployed

rural

2005

2006

2007

2008

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 greater disparities in regular internet use between socio-economic 

12 

13 

14 

Disadvantaged groups were defined as older people, people with disabilities, women, lower education 
groups, unemployed and residents in "less-developed" regions. 
Other goals included a 90% target for broadband coverage, increased coverage of underserved locations 
and reduced regional disparities in Internet access, a target of 100% accessibility of public web sites and 
commitments on fostering cultural diversity in the information society. 
See "Benchmarking from a policy perspective – eInclusion report", December 2006 

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23 

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groups than the EU average (Table 1). The countries with the largest disparities are Romania, 
Greece,  Bulgaria,  Cyprus,  Portugal,  Slovakia,  Spain,  Lithuania,  Slovenia  and  Italy.  By 
contrast,  the  countries  exhibiting  the  strongest  degree  of  equality  are  the  Netherlands, 
Sweden,  Norway,  Denmark,  Finland  and  Luxemburg.  This  pattern  corresponds  largely  to 
countries'  overall  connectivity.  Indeed  the  correlation  coefficient  between  the  percentage  of 
regular internet users in the population as a whole and the degree of disparity in regular use 
across countries is 0.94. 

When  it  comes  to  the  performance  of  specific  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  exhibits  the  largest  variation  in  disparities 
across  countries  is  for  those  aged  55-64.15  While  in  countries  such  as  Norway,  the 
Netherlands,  Denmark  and  Luxemburg  there  is  very  little  inequality,  in  others,  such  as 
Romania, Cyprus, Greece and Bulgaria, there are very large disparities. 

Table 1 

Index of internet use in at risk groups by country in 2008

 aged 55-64   aged 65-74 

 women 

 low educated 

inactive   unemployed 

 rural 

 total at risk 
index 

0.63 
0.67 
0.45 
0.80 
0.85 
0.87 
0.82 
0.53 
0.27 
0.51 
0.73 
0.46 
0.37 
0.79 
0.68 
0.79 
0.61 
0.63 
0.78 
0.65 
0.70 
0.58 
0.54 
0.54 
0.66 
0.81 
0.81 
0.47 

0.45 
eu27
0.52 
be
0.15 
bg
0.31 
cz
0.56 
dk
0.54 
de
0.39 
ee
0.53 
ie
0.18 
gr
es
0.29 
0.52 
fr
0.27 
it
0.29 
cy
0.32 
lv
0.24 
lt
0.73 
lu
0.45 
hu
0.39 
mt
0.70 
nl
0.52 
at
0.30 
pl
0.21 
pt
0.12 
ro
0.19 
si
0.27 
sk
0.56 
fi
0.64 
se
0.56 
uk
:
is
0.66 
no
Max.
0.73 
0.12 
Min.
0.61 
Range
S.D.
0.18 
Note: Figures in italics are for 2007, except for Poland where it is 2006

0.30 
0.32 
0.04 
0.16 
0.51 
0.37 
0.24 
0.26 
0.03 
0.14 
0.35 
0.16 
0.11 
0.11 
0.10 
0.51 
0.27 
0.24 
0.49 
0.35 
0.06 
0.11 
0.04 
0.08 
0.10 
0.37 
0.53 
0.41 
:
0.45 
0.53 
0.03 
0.50 
0.16 

0.95 
0.92 
0.97 
0.94 
0.98 
0.91 
1.00 
1.00 
0.85 
0.92 
1.02 
0.86 
0.91 
0.96 
0.98 
0.86 
0.98 
0.93 
0.96 
0.89 
0.98 
0.89 
0.96 
0.98 
0.95 
0.99 
0.98 
0.94 
:
0.97 
1.02 
0.85 
0.17 
0.04 

0.68 
0.73 
0.33 
0.53 
0.85 
0.76 
0.52 
0.54 
0.33 
0.43 
0.71 
0.54 
0.31 
0.46 
0.44 
0.83 
0.61 
0.41 
0.88 
0.68 
0.43 
0.45 
0.27 
0.48 
0.45 
0.78 
0.92 
0.79 
:
0.88 
0.92 
0.27 
0.65 
0.19 

0.86 
0.87 
0.27 
0.59 
0.16 

:

0.80 
0.77 
0.55 
0.55 
0.84 
0.84 
1.03 
0.77 
0.85 
0.88 
0.97 
0.86 
1.00 
0.63 
0.62 
0.62 
0.71 
0.74 
1.14 
0.88 
0.57 
0.76 
0.69 
0.73 
0.45 
0.90 
1.04 
0.83 

0.91 
1.14 
0.45 
0.69 
0.17 

:

0.82 
0.92 
0.64 
0.90 
0.94 
0.87 
0.94 
0.82 
0.70 
0.78 
0.90 
0.84 
0.69 
0.91 
0.84 
1.01 
0.86 
1.00 
0.95 
0.89 
0.82 
0.76 
0.58 
0.94 
0.97 
0.95 
0.98 
0.90 

:

0.99 
1.01 
0.58 
0.44 
0.11 

0.66 
0.69 
0.45 
0.60 
0.79 
0.74 
0.71 
0.64 
0.46 
0.56 
0.74 
0.57 
0.53 
0.60 
0.56 
0.76 
0.64 
0.62 
0.85 
0.69 
0.55 
0.54 
0.46 
0.56 
0.55 
0.77 
0.84 
0.70 
:
0.82 
0.85 
0.45 
0.40 
0.12 

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

15 

Measured by the standard deviation. 

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24 

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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 usage in households and by individuals (2008), 
the  main  reason  for  not  having  internet  in  the  home  relates  to  the  perceived  lack  of  need 
(Figure  3);  38%  of  households  responded  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  reasons  relate  to  privacy  and  security  concerns16 
(5%) and physical disability (2%). The importance of these factors has not changed over time. 

Reasons for not having Internet at home (2008)

Total

Single parent with dependent children

All types with dependent children

Households living in sparsely populated area (less than 100
inhabitants/Km2)

Figure 3 

50

45

40

35

30

25

20

15

10

5

0

Access costs

Physical
disability

Access
elsewhere

Equipment
costs

Don't need

Privacy or
security
concerns

Lack skills

Don't want Other reasons

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

With  regard  to  physical  disability,  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 Commission on the status of 'eAccessibility' in Europe shows 
that  people  with  disabilities  do  indeed  continue  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 security transfers over the 
internet. See http://ec.europa.eu/public_opinion/flash/fl_225_en.pdf 

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25 

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Box 1: Overview of the results of the study on "Measuring Progress of eAccessibility in 
Europe" 

In  2005,  the  European  Commission  produced  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  (utilising  freedoms  given  to  Member  states  in 
transposing the Public Procurement Directives); the 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  situation  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 overall eAccessibility status had taken place since 2007 
and that the main conclusions remained valid. 

These  conclusions  were  that  there  was  only  limited  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  could  be  found  across  the  spectrum  of  ICT  products 
and services, for example telephony, TV, web and self-service terminals. With regard to the internet, it 
was  found  that  very  few  websites  met  accepted  international  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 comparison 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 was not unrealistic to aim for a stronger one. 

The  eAccessibility  ‘patchwork’:  Finally,  the  situation  across  Europe  for  both  eAccessibility  status 
and eAccessibility policy was very much a 'patchwork'. The overall picture showed many important 
gaps,  uneven  attention  across  the  spectrum  of  eAccessibility  themes,  and  wide  disparities  across  the 
Member States. 

Further, the study also showed a strong relationship between eAccessibility status and policy, showing 
that good policy and good eAccessibility status were 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_society/activities/einclusion/policy/accessibility/com_ea_2005/index_en.htm 

Across  different  socio-economic  groups  the  picture  varies  somewhat.  In  particular,  for 
households with children, the main reasons relate to access and equipment costs. This is even 

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26 

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more so the case for single parents with children. On the other hand, for these two groups lack 
of skill and a perceived lack of need play a smaller 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 those living in sparsely populated regions the reported reasons for 
not having the internet at home are basically the same as for the population at large, showing 
that living in a rural area does not affect people's perceptions. 

Looking  at  reasons  for  not  having  the  internet  at  home  by  income  group  confirms  the 
importance of financial barriers for those on lower incomes (Figure 4). Access and equipment 
costs are, obviously, more important the lower the 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. 

Reasons for not having Internet at home by income group (2008)

Figure 4 

45

40

35

30

25

20

15

10

5

0

Access costs

Physical
disability

Access
elsewhere

Equipment
costs

Don't need

Privacy or
security
concerns

Lack skills

Don't want

Other reasons

Total

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(cid:31)

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

2.4. 

Barriers to broadband take-up 

Given  the  strong  correlation  between  internet  and  broadband  penetration  (0.92  across 
countries), it is not surprising that the barriers to broadband adoption are similar to those of 
internet use. Looking at the figures for broadband penetration across various socio-economic 
groups  indicates  a  strong  role  for  income  in  determining  penetration  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 regions also have significantly lower rates of penetration. By 
contrast, households with children have higher rates of take up. 

Data  also  show  that  strong  increases  in  broadband  penetration  have  taken  place  across  all 
groups. In particular the situation of single parents 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  group  of  people  in  the  highest  quarter  of  the  income 
distribution. 

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whereas  this  group  was  lagging  in  2005  it  now  has  a  higher  rate  of  penetration  than  the 
average. Weakest progress has been made in least 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 perceived lack of need (Figure 6). Another important reason is lack 
of availability. For people in sparcely populated regions this is the most important reason. 

Broadband penetration by type of household (%)

Figure 5 

80

70

60

50

40

30

20

10

0

All households

Single parent with
dependent children

All types with
dependent children

Households in least
developed regions

Households living in
sparsely populated
area (less than 100
inhabitants/Km2)

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(cid:31)

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)

s
s
e
c
c
a
d
n
a
b
d
a
o
r
b
t
u
o
h
t
i

l

w
s
d
o
h
e
s
u
o
h
f
o
%

45

40

35

30

25

20

15

10

5

0

too expensive

no need

not available

have access elsewhere

other reasons

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 

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28 

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analysis  on  microdata  for  individuals/households.  Studies  of  this  type  suggest  that  age  and 
education are the two most important factors influencing internet take-up (Figure 7).18 19 

Individuals who used the Internet at least once a week, by age and level of education, 
EU27, 2008 (%)

no or low formal education

medium formal education

high formal education

Figure 7 

100

90

80

70

60

50

40

30

20

10

0

EU avg

Aged 16-24

Aged 25-54

Aged 55-74

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  affect  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 launching 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 digital  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 

19 

As reported in OECD (2008), analysis of this kind, undertaken for France by Frydel (2006), shows that 
age and education are the main factors influencing internet access. A study for Japan, undertaken 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  (17.4%),  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. 
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  

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29 

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2.6. 

Disparities in Digital Literacy 

Since  2005,  progress  has  also  been  made  in  reducing  digital  literacy  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  literacy  disparities  index  increased  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 exhibiting the largest disparities: those aged 65 to 
74,  the  economically  inactive  and  the  low  educated  (all  +0.05  p.p.).  However,  those  in 
categories exhibiting the largest disparities remain largely excluded. The categories showing 
the least improvement are those which are closest 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  over  the  period  2006  to  2007,  both  for  the  total 
population  (+5  p.p.)  as  well  as  for  individual  disadvantaged  groups,  with  in  particular  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  found  among  the  old,  inactive  and  the 
low educated. 

Figure 8 

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

Digital Literacy Disparities
(1 = digital literacy indicator average in total population)

0.91

0.89

Total index value 
2007: 0,68

0.66

0.63

Total index value 2006: 
0,64

0.61

0.56

0.47

0.42

0.29

0.24

0.93

0.91

0.88

0.84

55 to 64 index

65 to 74 index

Women index

Low education index

economically
inactive/retired index

Unemployed index

Rural areas index

2006

2007

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  over  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 

30 

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Table 2 

2006
2007

2006
2007

EU total
55
60

EU total
57
60

Digital Literacy

Internet skills
aged 55 to 64 aged 65 to 74 women 

34
39

13
17

51
56

low educated
32
37

inactive unemployed 

22
27

48
55

Computer skills

aged 55 to 64 aged 65 to 74 women 

37
40

16
19

54
57

low educated
35
38

inactive unemployed 

25
29

54
57

rural
46
52

rural
48
53

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

Looking across countries shows that the pattern of digital literacy disparities is similar to that 
for  "regular  use"  (Table  3).  Indeed,  the  correlation  across  countries  between  the  disparities 
index  for  "regular  internet  use"  and  "digital  literacy"  is  greater  than  0.95.  The  worst 
performers  in  terms  of  digital  literacy  disparities  are  Bulgaria,  Romania,  Latvia,  Lithuania, 
Greece, Malta, Poland, Cyprus, Portugal, Slovenia, Italy, and Hungary. The best performers 
are Norway, the Netherlands, Sweden, Iceland, 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  and  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 disparities across countries, measured by the standard deviation, is the group of 
the low educated. 

As with the total index, digital literacy disparities of specific disadvantaged groups are highly 
correlated  with  disparities  in  regular  internet  use.  The  main  exception  is  for  'women'. 
However, this is mainly due to the lack of variation 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. 

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31 

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Table 3 

Index of digital literacy disparities in at risk groups by country 2007

aged 55 to 64

aged 65 to 74

women

low educated

inactive unemployed

rural

total at risk 
index

eu27
be
bg
cz
dk
de
ee
ie
gr
es
fr
it
cy
lv
lt
lu
hu
mt
nl
at
pl
pt
ro
si
sk
fi
se
uk
is
no
Max.
Min.
Range
S.D.
Note: Figures in italics are for 2006 except for Malta where they are 2005

0,29
0,30
0,04
0,17
0,58
0,44
0,15
0,25
0,07
0,15
0,22
0,12
0,11
0,11
0,07
0,49
0,19
0,21
0,52
0,40
0,07
0,10
0,03
0,13
0,14
0,36
0,60
0,37
0,65
0,67
0,67
0,03
0,64
0,20

0,66
0,70
0,37
0,56
0,86
0,81
0,51
0,50
0,30
0,42
0,64
0,53
0,35
0,47
0,35
0,85
0,60
0,43
0,81
0,71
0,40
0,46
0,30
0,48
0,43
0,77
0,85
0,78
0,87
0,80
0,87
0,30
0,57
0,19

0,91
0,93
0,74
0,89
1,09
1,03
0,91
0,94
0,74
0,90
0,95
0,75
0,82
0,91
0,87
1,01
0,94
0,81
1,08
1,00
0,84
0,80
0,70
0,94
1,02
1,03
1,04
1,00
1,14
1,10
1,14
0,70
0,44
0,12

0,61
0,65
0,28
0,73
0,95
0,93
0,78
0,46
0,25
0,52
0,76
0,40
0,31
0,67
0,65
0,89
0,52
0,55
0,89
0,70
0,65
0,56
0,38
0,51
0,65
0,84
0,90
0,41
1,04
1,02
1,04
0,25
0,79
0,22

0,47
0,49
0,12
0,40
0,60
0,60
0,35
0,54
0,25
0,35
0,49
0,28
0,33
0,38
0,23
0,61
0,41
0,37
0,68
0,57
0,30
0,23
0,16
0,24
0,37
0,53
0,67
0,57
0,62
0,68
0,68
0,12
0,56
0,16

0,93
0,88
0,42
0,64
0,97
0,93
1,02
0,90
1,30
1,00
1,08
1,06
1,27
0,58
0,58
0,78
0,64
0,93
1,13
0,96
0,78
0,98
0,76
0,78
0,75
0,92
1,04
0,68
0,81
1,01
1,30
0,42
0,88
0,20

0,88
0,85
0,60
0,91
0,93
0,95
0,92
0,88
0,84
0,82
0,94
0,90
0,70
0,90
0,78
1,02
0,83
1,02
0,98
0,92
0,88
0,80
0,44
0,92
0,97
0,92
0,96
1,02
0,95
0,96
1,02
0,44
0,58
0,12

0,68
0,69
0,37
0,61
0,85
0,81
0,66
0,64
0,54
0,59
0,73
0,58
0,56
0,57
0,51
0,81
0,59
0,55
0,87
0,75
0,56
0,56
0,39
0,57
0,62
0,77
0,87
0,69
0,87
0,89
0,89
0,37
0,52
0,14

2.7. 

The emerging Second Digital Divide 

Going beyond basic use of the internet, policy on eInclusion also recognises the importance of 
reducing disparities in the quality of internet  use, the so-called Second Digital Divide. Data 
show that digital disparities also exist between socioeconomic groups with regard to the types 
of activities undertaken and the intensity with which they are performed. 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 

32 

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Quality of Use

Figure 9 

s
r
e
s
u
t
e
n
r
e
t
n

i

f
o

%

100

90

80

70

60

50

40

30

20

10

0

All Individuals

age 16-24

age 25-54

age 55-74

with no or low
education

with medium
education

with high education

who have posted messages to chat rooms, forum…
who have used a search engine to find information
who have used the Internet to make phone calls

who have sent an email with attached files
who have used peer-to-peer file sharing for exchanging movies, music, etc.

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

Users with higher educational levels use the internet more intensively, 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  example,  in  the  use  of  eGovernment  services 
where those with tertiary education are far more likely to go beyond basic information and use 
the internet to submit forms and carry out transactions. 

Figure 10 

s
r
e
s
u
e
n
nl
o
f
o
% 

i

90

80

70

60

50

40

30

20

10

0

The Second Digital Divide
Level of Education and Use of Internet, 2007

56

62

47

41

35

43

44

31

33

79

40

28

looking for health related
information

internet banking

eGovernment

eCommerce

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 significant progress in the area of eInclusion, it is clear that more 
will  need  to  be  done  to  close  digital  divides  and  achieve  the  ambitious  Riga  goals.  Gaps 

EN 

33 

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continue  to  exist  in  regular  use  of  the  internet  and  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,  there  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  incomes.  Empirical  analysis  shows  that  these 
factors are to a large extent related 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  report  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  European  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 encouraging 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  the  old  and  disabled,  reducing  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 highlighted that an eInclusion strategy focused 
on the inclusion of digitally excluded groups also targets an overall improvement in internet 
use. Supporting this intuition is the empirical evidence which shows that rates of regular use 
are highly correlated with measures of digital disparities. 

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34 

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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 and, more in general, with the 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.  Further  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 increasing 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  social  organizations23)  within  similar 
social  backgrounds.  While  about  half  of  internet  users  reported  their  participation  in  social 
activities, only a third of non-internet users did so (Figure 1). Similarly, frequent internet use 
is associated with higher levels of generalised trust24 (Figure 2). 

The cross-sectional data used in the analysis do not allow concluding that the internet has a 
one  way  enhancing  effect  on  social  resources,  as  this  can  work  the  other  way  around  too25. 
Those with less social resources may be the ones who have fewer 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 
22 
23 
24 

25 

26 

http://stats.oecd.org/glossary/detail.asp?ID=3560 
http://ec.europa.eu/public_opinion/flash/fl_241_en.pdf 
Like sports clubs, religious/voluntary aid organizations.  
Trust is measured through the following question: "Generally 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. 
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. 
Van  Dijk,  J.  (2005)  "The  deepening  divide.  Inequality  in  the  information  society",  Thousand  Oaks, 
Sage. 

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35 

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Figure 1  

60%

50%

40%

30%

20%

10%

0%

26.6%

21.7%

Participation in social organizations and internet access/use

19.8%

13.5%

18.9%

15.0%

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  

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Trust and internet access/use

0.362

0.282

0.459

0.455

0.275

0.447

Uses Internet

Has access, but does not use

No access

Medium 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 social leisure activities than non-users (Figure 3). 
They  are  more  likely  to  engage  in  active  sport  (64%  of  them  weekly  vs.  40%  among  non-
users), more than twice as likely to go to the 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. 

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36 

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Figure 3 

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Leisure activities (at least once per week) and internet access/use

0.641

0.418

0.392

0.848

0.692

0.706

0.452

0.254

0.204

0.136

0.054

0.064

Sport

Going to cinema, theatre, performances

Eating out

Meeting friends

No 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 expected to relate to a decline 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 non-users of similar social 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,  resource  enhancing  and  instrumental  (Table  1).  A  person  is 
considered  to  be  a  recreational,  resource  enhancing  or  instrumental  user  if  she/he  pursues 
more  of  the  respective  activities  than  the  average  user.  Recreational  use  is  associated  with 
playing,  downloading  media  or  software,  using  social  networking  sites,  sharing  videos  and 
photos,  etc.  Instrumental  usage  includes  buying  and  selling,  eBanking  and  dealing  with  the 
public  administration.  The  resource-enhancing  use  includes  e-learning,  reading  the  news, 
social networking and work.  

Table 1: Typology of internet uses 

Recreation 

Resource enhancing 

Playing and downloading 

Learning online 

Instrumental 

eBanking 

Sharing media 

Social networking 

Buying and selling online 

Transferring to other devices 

Following the news 

eGovernment 

Work 

27 

As the term indicates, "multivariate analysis" refers to techniques dedicated to the analysis of data sets 
with more than one variable.  

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37 

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The  categories  are  not  mutually  exclusive  (Figure  4).  About  one  quarter  of  EU27  internet 
users are "all-round users", meaning that they fall under all categories. On the contrary, 18% 
of EU27 users make "tentative users": they use e-mails and search engines but have not yet 
engaged in more advanced applications.  

Figure 4 

Instrumental

9.2%

Tentative: 18.2% 

15.8%

 3.4%

24.0%

10.5%

12.5%

6.5%

Resource 
enhancing 

Recreational 

Results  reveal  that  instrumental  and  resource  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 activities (Figure 5). When interpreting the results, 
it is important to bear in mind again that a clear causality cannot be established.  

Figure 5  

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

The impact of type of Internet use on having social leisure time

0.41

0.25

0.07

Instrumental use

Resource enhancing use

Recreational use

Each bar indicates the changes of odds of having more social leisure time than the European average compared to the baseline category. 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  backgrounds  have  different  access  to  information  technologies. 

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38 

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Among  internet  users,  younger  people  tend  to  use  it  more  often  than  older  people;  more 
educated people use it more often than less educated people, and urban residents more often 
than  people  residing  in  rural  areas.  Non-working  users  feature  a  higher  frequency  of  usage 
than working internet users (because the former group includes students).  

Recreational  usage  shows  strong,  negative  association  with  age.  The  resource-enhancing 
mode of use also decreases with age. This trend does not emerge in the case of instrumental 
use  (uptake  is  highest  in  the  medium  aged  group).  Each  of  the  three  types  of  use  increases 
significantly  with  education,  showing  that  less  educated  people  tend  to  use  the  internet  for 
fewer  and  less  advanced  purposes.  Persons  residing  in  urban  areas  tend  to  display  an 
extensive rather than a tentative use of the internet. Finally, manual workers use the internet 
less often for resource enhancing 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  manifold  opportunities  which  the  online  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  resource-enhancing  capabilities  (learning,  culture, 
health-related  information  and  work).  More  than  half  of  users  feel  that  the  internet  has 
improved their relationship with family 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

Your opportunity to meet new people

44%

The way you deal with public authorities

The way you shop

The way you pursue your hobbies

The way you manage your finances

Your relationships with family members and
friends

The way you perform your job

The way you get health-related information

Your opportunity to share views/access
culture

Your opportunity to learn

Your capability to be informed about current
issues

48%

50%

51%

51%

57%

66%

67%

70%

74%

87%

Source: Commission study on the Social Impact of IT, based on the Flash Eurobarometer – Information society seen by the 
citizens (2008) 

Internet users also expressed opinions on the costs of non-internet usage. The majority agreed 
that  those  who  do  not  use  the  internet  are  less  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 report that they feel less threatened by internet-

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39 

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related  risks  such  as  online  fraud  and  unintentional  disclosure  of  personal  data  (Table  3). 
Interestingly,  older  Europeans  are  more  likely  to  agree  that  non-users  are  missing 
opportunities  than  younger  Europeans  (with  similar  social  and  cultural  characteristics), 
suggesting that older people are well aware of the benefits of the internet.  

Most  people,  except  for  frequent  users,  disagree  with  the  statement  that  non  users  miss  the 
opportunity of socializing with friends and family. There is also a general disagreement with 
the idea that non users are less open and less informed, but frequent users tend to disagree less 
than non users do. Non-users, on the other hand, reported significantly more often that they 
can avoid frustration caused by complicated technologies, take less risk and have more time 
for friends, family and for themselves.  

Nevertheless in all of these issues, in spite of the significant differences, both users and non 
users somehow similarly agreed or disagreed with the statements 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  chances  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 

40 

   EN 

 
Table 2: Perceived implications of not using the Internet (% of those who agree) 

Frequency of Internet use 

No 
access 

No or 
less 
than 
once a 
month 

Once 
a day 
or 
once a 
week 

Several 
times a 
day 

N 

42.1 

35.1 

43.7 

53.5 

11237 

57.1 

56.2 

60.7 

64.5 

14673 

“People that don’t use the 
Internet” … 

A. Miss the opportunity of 
greater contact with friends and 
family 

B. Are at a disadvantage in their 
career prospects 

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)  

E. Are less open to the outside 
world 

F. Know less and are not as well 
informed as other people 

G. Have more time for 
themselves. family and friends 

H. Take less risk because they 
don't get exposed to the risk of 
online fraud 

I. Take less risk because they 
don't run the risk of other people 
finding out information about 
them 

J. Are less reachable for 
professional purposes 

K. Avoid the frustration of 
dealing with complicated 
technologies 

59.1 

58.9 

74.8 

80.1 

17603 

39.6 

36.6 

42.7 

44.8 

10484 

41.7 

42.0 

43.7 

47.0 

11196 

73.6 

74.3 

59.2 

54.8 

15778 

77.2 

76.0 

68.9 

62.9 

17025 

69.6 

68.1 

62.0 

57.0 

15253 

63.2 

59.0 

65.7 

70.1 

15920 

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 mobile phones, considering that penetration 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 

41 

   EN 

 
•  Mobile  telephony  leads  to  better  or  more  contacts  with  family  members,  friends  and  the 

outside world. 

•  Mobile telephony results in more stress and higher costs. 

Frequent  mobile  users  obviously  tend  to  agree  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  educated  tend  to  be  more  enthusiastic  about  the 
positive effects of mobile phones, both in terms 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 individuals 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  organisations  and  are  more  active  in  social  leisure 
activities. They also exhibit higher levels of trust. 

Furthermore, the general perception of internet users is that the internet has a positive impact 
on their everyday life, especially in relation to their resource enhancing capabilities. They also 
think  that  non-users  incur  costs,  for  example  related  to  fewer  chances  to  find  bargains  and 
being disadvantage in their careers. Many of these opinions were shared by non-users. Non-
users emphasised worries over security and frustration 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 opinion, non-users are missing out on the chances offered by internet 
use. It also shows that non-users have certain fears related to the social impact of ICT, which 
users do not share, suggesting that lack of familiarity with the internet may be an inhibiting 
factor.  This  confirms  conclusions  drawn  in  Chapter  2  in  relation  to  the  need  of  raising 
awareness of the benefits and opportunities of internet use. 

EN 

42 

   EN 

 
4. 

THE INTERNET AS A COMMUNICATION TOOL 

Over  the  last  five  years  the  EU  has  witnessed  great  progress  in  the  expansion  of  internet 
access, broadband connectivity and uptake of internet 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 internet on a frequent basis (every day or almost 
every day) increased from 23% to 43% over the same period. European consumers are rapidly 
changing  their  habits  and  increasingly  adopting  new  ways  of  communicating,  sharing 
information and interacting with business and public administrations. This change is growing 
in  parallel  to  the  take-up  of  broadband  connectivity,  which  is  gradually  offering  higher 
download and upload speeds at cheaper prices. 

The  percentage  of  the  EU  population  using  internet  services  has  grown  substantially  since 
2005  (Figure  1).  The  largest  increases  have  occurred  with  respect  to  the  proportion  of  the 
population  using  the  internet  for  sending  and  receiving  e-mails,  as  well  as  for  finding 
information  about  goods  and  services,  increasing  by  11  p.p.,  to  53%  and  50%  respectively, 
over the period up to 2008. Government take-up has also grown, with 28 and 68% of citizens 
and  business  using  eGovernment  services  respectively.  Other  less  popular  services  which 
require  more  advanced  internet  skills  have  also  grown  markedly,  with  the  proportion  of  the 
population using these increasing by between 6 and 10 p.p.. 

Percentage of individuals doing specific online activities in the previous 3 months, EU27

Figure 1 

60

50

40

30

20

10

0

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

2005

2008

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 communication systems and make possible the distribution and sharing 
of online information, content and applications, be it on wired or wireless networks, in 2008 
Eurostat  dedicated  a  special  module  of  the  survey  on  the  use  of  ICT  by  households  and 
individuals.  The  aim  was  to  measure  the  use  of  these  services,  looking  at  the  use  of 
information and entertainment services, the use of mobile internet and the willingness to pay 
for  audiovisual  content.  Data  from  the  module  provide  rich  information  on  the  take  up  of 
advanced services by countries and by socio-demographic characteristics.  

EN 

43 

   EN 

 
 
This chapter focuses on the results of the special module with regards to the use of the internet 
for advanced communication services. Section 1 focuses on how Europeans use the internet to 
communicate. While use of internet to communicate 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 cohorts of the population, while section 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  internet  and  communication  activities  remain  the 
primary action of internet users. E-mail was the first mass adoption service in the history of 
the internet and is now widely seen as a traditional 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 prior to the survey for 
advanced  communication  services,  which  include  creating  or  maintaining  web  logs,  using 
instant  messaging,  posting  messages  to  chat  sites,  newsgroups  or  online  discussion  forums, 
telephoning over the internet and video 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 throughout 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 across EU countries (Figure 2). 

Figure 2 

n
o
i
t
a
r
t
e
n
e
p
d
n
a
b
d
a
o
r
B

40%

35%

30%

25%

20%

15%

10%

5%

0%

Daily Internet access and broadband penetration

EU

CZ

PT

CY

EL

BG

RO

FR

BE, DE

UK

EE

AT

MT

SI

IE

LV

LT

HU

SK

ES

IT

PL

DK

NL

R2 = 0.8

FI

SE

LU

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 

Source: Commission services based on Eurostat and COCOM data (2008) 

Adoption of advanced communication services is also correlated with the level of broadband 
penetration,  although  the  correlation  is  somewhat  weaker  (Figure  3).  The  main  outlier 
countries  include  Germany  and  Malta,  which  exhibit  relatively  low  use  of  advanced 
communication  services  compared  to  their  relatively  high  broadband  penetration  level,  and 
Poland,  Hungary,  Latvia  and,  as  with  frequent  use,  especially  Slovakia,  which  feature  a 

EN 

44 

   EN 

 
 
 
relatively low level of broadband penetration despite having a high percentage of population 
using advanced services. 

Figure 3 

EU

n
o
i
t
a
r
t
e
n
e
p
d
n
a
b
d
a
o
r
B

40%

35%

30%

25%

20%

15%

10%

5%

0%

0%

Regular use of internet for advanced communication services and broadband penetration

DK

NL

SE

FI

FR

R2 = 0.4

LU

DE

UK

BE

MT

IE

AT

SI

EE

ES

IT

CY

EL

RO

BG

CZ

PT

LT

LV

HU

PL

SK

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

Use of internet for advanced communication services

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  not  demand  much  bandwidth,  like  instant  text 
messaging,  is  less  dependant  on  the  widespread  availability  of  broadband.  Spain,  Estonia, 
Portugal and Poland are more intensive users of this service than other countries with higher 
broadband penetration rates.  

Beyond  broadband  availability,  other  factors  are  also  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  services,  or  other  socio-economic 
factors  may  help  to  explain  these  differences.  Users  may  also  decide  to  subscribe  to  a 
broadband  service  not  for  communication  purposes  but  primarily  to  get  access  to 
entertainment content and services.  

Sending  and  receiving  e-mails  is  still  the  most  popular  communication  service  through  the 
internet (Figure 1): in 2008, 53% of surveyed individuals reported to have sent or received an 
e-mail  in  the  last  three  months.  Within  advanced  services,  instant  messaging  appears  as  the 
most  attractive  communication  application  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 service is very much linked to age. For younger 
people,  e-mail  is  also  a  very  dominant  application  (78%)  closely  followed  by  instant 
messaging (59%). Posting of messages (44%) and reading blogs (35%) are the following most 
common services. Interestingly, telephone over the internet and video calls is not one of the 
most demanded uses by younger users, exactly the opposite of what happens with people aged 
55 to 74, of which 7% seem to find in internet telephony and video calls the most interesting 
service.  

EN 

45 

   EN 

 
 
 
Figure 4 

Use of the internet as a communication tool in the last 3 months

creating or maintaining own weblog or blog

13%

4%

1%

video calls (via webcam) over the internet

10%

3%

telephoning over the internet

12%

21%

19%

reading weblogs or blogs

posting messages to chat sites, message
boards or online discussion forum

3%

telephoning over the internet and video calls

use of instant messaging (real-time
communication with other by typed text)

5%

5%

7%

5%

15%

16%

16%

35%

44%

31%

22%

59%

0%

10%

20%

30%

40%

50%

60%

70%

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 other means of communications? 

Despite the significant growth in the use of the internet for advanced communication services, 
such  services  do  not  yet  reduce  the  use  of  other  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

My internet calls replace mobile phone
calls – very much

2%

My internet calls replace mobile phone
calls – to some extent

My internet calls replace my use of fixed
telephone line (not linked to Internet) – very
much

My internet calls replace my use of fixed
telephone line (not linked to Internet) – to
some extent

My internet calls replace my use of e-mail –
very much

My internet calls replace my use of e-mail –
to some extent

6%

5%

4%

4%

3%

0%

1%

2%

3%

4%

5%

6%

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 the substitution effect starts to 
emerge.  For  approximately  one  third  of  the  people  using  this  service,  online  calls  have 
replaced  the  use  of  mobile  or  fixed  line  calls.  For  27%  of  users,  the  replacement  effect  on 

EN 

46 

   EN 

 
 
 
fixed line calls was even higher (Figure 6). Thus it appears that once one starts to use internet 
telephony, the uptake of traditional communication 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

My internet calls replace mobile phone
calls - to some extent

34,0%

My internet calls replace mobile phone
calls - very much

14,5%

My internet calls replace my use of fixed
telephone line (not linked to Internet) – to
some extent

My internet calls replace my use of fixed
telephone line (not linked to Internet) –
very much

My internet calls replace my use of e-mail
– to some extent

30,8%

26,9%

27,7%

My internet calls replace my use of e-mail
– very much

17,5%

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

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 services. 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  points  to  the  shift  by  young  users  from  e-mail 
applications to instant messaging services, although preferences for a particular service do not 
necessarily entail a significant drop in other communication channels. 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 services 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 making 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  abandoning  traditional  communications  means.  Only  2%  of  the 
population  acknowledge  an  intensive  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 services rely on a fixed connection and only 3% 
of the EU population uses a third generation mobile phone to access the Internet, 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 pricing models for fixed calls and the rise in the 
number of bundled broadband packages offering free voice telephony as a free service on top 

EN 

47 

   EN 

 
 
 
of  the  broadband  connection  may  partly  explain  why  users  do  not  feel  the  need  to  replace 
their fixed telephone line with internet communications services. 

the  population  which  refuses 

Similar conclusions can be drawn in relation to entertainment services (Figure 7). There still 
to  adopt  advanced 
remains  a  significant  part  of 
information/entertainment  services.  On  average,  3%  of  the  population  download  films  and 
videos instead of buying/renting a DVD; 4% is listening to web radios instead of listening to 
normal radio and 6% prefers to download music 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  administrations  or  the  reading  of  online  news  instead  of 
printed news, newspaper or magazines. These rates are particularly low for those aged 55-74. 

Figure 7 

Use of advanced  services to replace traditional services (2)

I'm reading online news instead of printed
news, newspapers or magazines - very
much 

2%

8%

I'm downloading music files instead of
buying a cd - very much

1%

I'm using online contacts instead of
personal contacts with public services
and administrations - very much

2%

6%

5%

I'm listening to web radios instead of
listening to normal radio - very much

1%

I'm downloading films and videos instead
of buying/renting a DVD - very much

0%

4%

3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

55-74

All individuals

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

EN 

48 

   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 

80%

70%

60%

50%

40%

30%

20%

10%

0%

Percentage of individuals by age group that have used Internet, in the last 3 months, 
for advanced communication services, EU27 (2008)

73%

51%

35%

35%

26%

17%

7%

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,  intensive  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  formalised  educational  institution  is  three  times  higher  than  the 
average (Table 2).  

Table 2 

Percentage of individuals who accessed the 
Internet,  on  average,  every  day  or  almost 
every day in the last 3 months (2008) 

Percentage  of 
obtained  IT  skills 
educational 
university, etc.) (2007) 

individuals  who  have 
through  formalised 
institution  (school,  college, 

Percentage of individuals who have carried 
out 3  or  4 of  the  Internet  related  activities 
(medium Internet skills) (2007) 

16-24 

25-34 

35-44 

EU avg. 

45-54 

55-74 

66 

57 

49 

43 

39 

20 

65 

38 

16 

22 

8 

43 

33 

24 

23 

17 

3 

8 

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

EN 

49 

   EN 

 
 
 
On average 43% of EU population accessed the Internet 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  everyday.  In  the  most  advanced  countries,  around 
90% of young people connect on a daily basis. With the exception of Romania and Cyprus, in 
all countries the percentage of young people connecting to the internet 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 difference lessens in the most advanced countries 
to about 18 p.p., but can be more than twice as much in the less advanced countries (Romania, 
Greece, Bulgaria, Portugal).  

It  is  also  worth  noting  that  differences  between  countries  are  reduced  when  the  16-24  age 
group is taken as a reference. Besides the most developed countries, young people in Latvia, 
Portugal or Poland have similar frequency of use as in the UK, Germany or Belgium. 

Figure 9 

100

90

80

70

60

50

40

30

20

10

0

Percentage of individuals who accessed the Internet, on average, every day or almost every day in 
the last three months

100

90

80

70

60

50

40

30

20

10

0

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 IS

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 communication 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  types  of  services,  both  for  communication  and 
entertainment  purposes,  students  and  young  people  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  content  pushed  by  a  reduced  number  of  content 
generators, but veritable users of a borderless space in which content and services are made 
available for active users to download, exchange, create and re-create, distribute, share or re-
use.  

EN 

50 

   EN 

 
 
I have used Internet, in the last 3 months, for advanced communication services

Figure 10 

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

All persons
65-74

All persons
55-74

Retired and
other inactive

All persons
55-64

Persons aged
16-74 with no
or low
education

living in thinly
populated
areas

All females
16-74

Unemployed

living in
intermediate
populated
areas

All individuals All males 16-

74

Employee and
self-employed
(incl. family
worker)

living in
densely
populated
areas

Student

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 content 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 communication 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  access  the  Internet.  Interestingly,  a  heterogeneous  group  of 
countries  are  the  top  performers,  with  Nordic  countries  along  with  Spain,  Slovenia,  Czech 
Republic,  Slovakia  and  Portugal.  Some  countries  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

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

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 

51 

   EN 

 
 
 
These data refer exclusively to the use of third 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 advantages 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  substitute  of  fixed  broadband 
technologies for private consumers, especially in less densely populated areas.  

One  reason  for  this  lack  of  full  substitutability  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  coverage  of  3.5G  networks  is 
limited  to  major  cities  with  high  population  density29.  This  compares  to  coverage  rates  of 
around 90% for DSL technologies in most countries. 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  consumer  prices  for  mobile  services.  Contrary  to  the  pricing 
system of fixed broadband access, based on unlimited consumption in exchange of a flat rate 
in most EU countries, pre and post-payment are still predominant 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 pay 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 services as well as frequency of access30. 

Mobile  handsets  have  come  a  long  way  since  the  first  models  appeared  on  the  market  and 
their ergonomics  and usability has improved  significantly, on top of being  capable of  many 
more functionalities. Despite these improvements, it is clear that for a number of applications 
and  services  mobile  handsets  cannot  compete  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 adapted for being browsed or used with a mobile handset. These 
factors  altogether  can  explain  the  low  adoption  of  mobile  handsets  as  a  tool  for  using 
advanced  internet  services.  However,  smartphones  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 mobile applications. 

Sending  photographs  or  video  clips  via  MMS  messages  represent  by  far  the  most  popular 
advanced services via a mobile phone (Figure 12). When asked, 18% of EU population said 

28 

29 
30 

See  the  14th  Progress  Report  on  the  single  European  electronic  communication  market,  available  at 
http://ec.europa.eu/information_society/policy/ecomm/library/communications_reports/annualreports/1
4th/index_en.htm 
Around 60% of the overall population according to Screen Digest 
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 new tariff plans for mobile services, including flat rates, have been 
made available since the second half of 2008. 

EN 

52 

   EN 

 
                                                 
they had sent a photo or a video clip in the last three months, a figure that 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 services by younger generations follows the same patter, i.e. around 
twice  as  many  the  numbers  of  users.  Use  of  other  services  (subscription-paid  information 
services,  personal  navigation,  mobile  payments  and  TV  and/or  video  watching)  are  still 
marginal activities. 

Figure 12 

I have used a mobile phone, in the last 3 months, to

send photographs or video clips

18%

40%

browse the internet

6%

13%

read e-mails

8%

5%

upload photographs or video clips to
websites

receive subscription-paid information
services

10%

3%

3%

6%

for personal navigation (e.g. for receiving
nearby travel, shopping, event
information)

4%

2%

pay for goods or services (instead of cash
or credit card)

2%

1%

download and/or watch TV or video

3%

1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

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  spend  much  more  time  using  fixed  online  data 
applications than mobile (Table 3)31.  

31 

Gartner's  User  survey  analysis:  Next-Generation  Communications  Consumer,  Worldwide,  2020, 
February 2009 

EN 

53 

   EN 

 
 
                                                 
Table 3: Average hours per week using fixed online and mobile data applications 

Average 

Growth in 
average use by 
2020 

Fixed 

Internet blog 

Photo blog 

Video blog 

Instant messaging 

Chat rooms 

Social communities 

Fixed average 

Mobile 

Mobile blog 

Mobile photo blog 

Mobile video blog 

Mobile instant messaging 

Mobile chat rooms 

Mobile social communities 

Mobile average 

Total for fixed and mobile 

Source: Gartner 

0.52 

0.28 

0.34 

1.30 

0.50 

0.80 

0.62 

0.09 

0.07 

0.09 

0.33 

0.12 

0.13 

0.14 

0.69 

7% 

18% 

36% 

26% 

15% 

22% 

21% 

61% 

35% 

39% 

46% 

49% 

45% 

46% 

23% 

Provision of mobile content by mobile operators was initially not very successful, mostly due 
to low quality services and bad pricing conditions. The spread of 3G networks, new pricing 
conditions  including  flat  rates  and  the  entry  into  the  mobile  content  market  of  handset 
manufacturers  and  of  open  distribution  platforms  are  expected  to  contribute  to  change  the 
situation.  At  the  moment,  the  very  gradual  development  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 situation that is not likely to change. The growing mobile content 
market is therefore becoming very similar 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 advanced communication services. The 

EN 

54 

   EN 

 
 
 
 
 
 
 
 
 
continuing  spread  of  faster  and  cheaper  broadband  communications  has  been  one  important 
factor  behind  these  results.  Sending  and  receiving  e-mails  is  still  the  most  popular 
communication  service  through  the  internet.  Predominance  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 States, 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 level of internet and informatics skills of this 
generation,  to  a  large  extend  obtained  though  formalised  education.  Their  behaviour  as 
regards  the  internet  is  also  somehow  different  from  the  rest  of  the  population:  in  particular, 
the  young  are  more  extensive  users  of  advanced  internet  services.  73%  of  them  access 
advanced communication services. The next chapter will look at further implications of such 
behaviour. 

As such, the young – and in particular students - can be considered as lead users of advanced 
internet  services,  showing  the  way  for  other  groups  in  society.  The  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  should  continue  to  be  taken  to  minimise  these 
differences.  

EN 

55 

   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 online activities. Next to 
the online distribution of professionally-produced media content, such as music, films, video 
games and publishing content, 2008 has been characterised 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 distribution of online copyrighted 
material and, according to the content industry, levels 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 attitude 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 internet connection.  

This stylised fact is posing a number of challenges to policy makers, regulators and industry. 
In the context of the review of the EU regulatory framework for electronic communications, 
for  example,  the  introduction  of  an  amendment  by  the  European  Parliament  in  May  2009, 
after reaching an agreement, was motivated by the treatment of file sharing over the internet. 
Decisions  on  key  aspects  of  the  telecoms  reform  were  put  on  hold  because  of  a  question 
relating to internet use rather than to traditional telecom aspects. 

While  Europe  is  one  of  the  most  creative  regions  of  the  world  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, including the advertising market which represents the biggest online 
content  market  in  revenues  followed  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 increasing importance of on-
line  delivery  of  audiovisual  content.  The  Audiovisual  Media  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 

33 
34 
35 

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. 
OECD Information Technology Outlook 2008 
Available at http://ec.europa.eu/avpolicy/reg/avms/index_en.htm 
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 offers of shorts, documentaries and features films with a 
broader European coverage will receive around € 5.75 million.  

EN 

56 

   EN 

 
                                                 
Apart  from  challenges  posed  to  audiovisual  regulatory  and  support  instruments  the  overall 
development of online distribution of creative content in Europe, regardless of its origin needs 
to be addressed. The online distribution of creative works such as music, films, video games 
and publishing content is transforming the creative industries in Europe. Sales of content on 
packaged  media  are  rapidly  decreasing,  but  online  distribution  does  not  yet  compensate  for 
these  falling  revenues,  despite  the  high  potential  that  clearly  exists.  De-materialisation  of 
creative content distribution is shaking up the business models of the creative 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  Single  Market"  initiative36.  This  initiative  included  the  "Content 
Online  Platform",  a  stakeholders'  discussion  and  cooperation  platform  (creators,  rights 
holders,  content  providers,  consumer  associations,  internet  service  providers  and  the 
telecommunication  industry)37.  One  of  the  main  issues  that  the  Content  Online  Platform 
focused  upon  was  improved  availability  of  creative  content  through  the  establishment  and 
development of new online business models.  

The  Platform  considered  that  in  most  cases,  online  offers  are  not  yet  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  models  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  traditional  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 reach 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 within the Content Online Platform have shown 
that,  in  general,  on  the  level  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  reveal  that  less  than  5%  of  Europeans  had  paid  for  online 
content in the last 3 months. For the youngest age group (16-24), this figures is twice as high. 
When looking at the individuals that did not pay for online audiovisual 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 
37 

38 

See: http://ec.europa.eu/avpolicy/other_actions/content_online/index_en.htm.  
The  Final  Report  of 
http://ec.europa.eu/avpolicy/docs/other_actions/col_platform_report.pdf 
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. 

the  Content  Online  Platform  was  published  on  12  May  2009: 

EN 

57 

   EN 

 
                                                 
availability, enhanced quality, better payment methods, the right to share material) or the lack 
of freely available content would convince between 15 and 20%. Interestingly, the willingness 
to pay of youngsters and the general population is very similar (Figure 1).  

Figure 1 

Paying for content (2008, %)

In the last 3 months, I paid for online audiovisual content

In the last 3 months, I didn't pay for online audiovisual content

The following would make me pay for online audiovisual content - Nothing, no willingness to pay*

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 - Wider range of choices, content
more easily available*

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 - Lack of free available content*

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 - More convenient payment
methods*

The following would make me pay for online audiovisual content - Other motivation*

* % of individuals not having paid for online audiovisual content in the last 3 months

All individuals

Aged 16-24

0

10

20

30

40

50

60

70

Source: Eurostat Community Survey on ICT Usage by Households and by Individuals  

The limited willingness to pay in return for service 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. For 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  fee.  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, internet 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 possible lack of freely available 
online  content  as  a  reason  for  paying,  calls  into  question  the  argument  put  forward  by 
representatives of the content industry that European consumers will in the long term suffer 
from  a  lack  of  commercial  availability  of  high  quality  content  if  the  current  model  of 
audiovisual content distribution, based on illegal copying, is not curved. 

EN 

58 

   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 phenomenon, 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 for 95% of the total digital music market. 
The situation is not very different in the online video market. It is estimated that worldwide 
only one out of five movie downloads is carried out legally40. 

Some  evidences  of illegal  downloads in  European  Member  States  are  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 P2P networks in May 2008, compared with 

12.2 million cinema tickets sold41. 

•  Germany:  P2P  traffic  was  more  prolific  than  all  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 billion 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  difficult  to  measure  the  exchange  of  content  over  the 
Internet. A proxy measure is the rise in visits to websites offering IP addresses 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 for 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  creative  efforts  and  created  outside  professional 
routines  and  practices.44  There  are  very  few  official  figures  regarding  the  diffusion  of  User 

39 

40 
41 
42 
43 
44 

EN 

the  Phonographic  Industry)  Digital  Music  Report  2009: 

IFPI  (International  Federation  of 
http://www.ifpi.org/content/library/DMR2009.pdf 
NPD Group - IFPI Digital Music Report 2009 
Equancy and CO and Tera Consultants - IFPI Digital Music Report 2009 
Ipoque - IFPI Digital Music Report 2009 
Promusicae/Gfk: http://www.promusicae.org 
Study 
IDATE for the European Commision December 2008. 

on  User-created 

Supporting 

content: 

a 

participative 

information 

society  

59 

   EN 

 
                                                 
Created  Content.  The  assessment  of  the  magnitude  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 uncertainty 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  like Youtube (specialised in videos), MySpace (specialised in 
music) or flickr (specialised in photographs).  

With regards to the uploading of content, Estonia is the leading Member State with 21% of 
citizens  declaring  to  have  uploaded  content  in  the  last  3  months.  In  Latvia,  the  Netherlands 
and the UK  almost 20%  of  citizens have declared to have done so. In the countries lagging 
behind (Czech Republic, Bulgaria, Greece and Slovakia) less than 5% of the population has 
declared to have uploaded content in the recent months (Figure 2). 

I have used Internet, in the last 3 months, for uploading self-created content (text, images, photos, 
videos, music, etc.)

Figure 2 

25%

20%

15%

10%

5%

0%

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  entertainment  purposes  and  to  replace  other 

means of communications: a challenge 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 strongly differs from the traditional one-to-
many  information/content  model.  This  new  paradigm  calls  into  question  the  traditional 
broadcasting and content industry business models in which professional communicators and 

45 

46 

EN 

on  User-created 

Study 
IDATE for the European Commision December 2008. 
According  to  the  Alexa,  the  US  were  the  leading  country  regarding  MySpace  (66.9%  of  the  users), 
flickr (31.5% of the users) and You Tube (22.63% of the users).  

participative 

information 

Supporting 

content: 

society  

a 

60 

   EN 

 
 
                                                 
content  creators  had  the  technical  and  financial  means  to  address  a  wide  and  rather  passive 
audience. 

The  newspaper  industry,  for  instance,  is  struggling  to  survive  amidst  falling  readership  and 
advertising revenues, a trend set in motion by the 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  counterparts,  unencumbered  by  debt,  but  even  so  the 
combination  of  recession  and  structural  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 personal web pages based on the RSS48 Technology (Figure 3), 
which allows receiving up-to-date information from other websites in a different number of 
formats; the number of blogs which can be labelled as online citizen journalism are counted 
by  millions.  Also  news  sites  that  aggregate  headlines  from  many  different  sources  are 
increasingly being used by web users as the main source of daily information, a controversial 
trend  from 
their  copyrights  and  revenue 
opportunities. 

the  publishers'  viewpoint,  concerned  for 

8% of EU citizens now read online news instead of printed magazines and newspapers. This 
figure increases to 18% in the case of occasional 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. 

I have used Internet, in the last 3 months, for browser based news feeds (e.g. RSS) for reading new 
content on websites

Figure 3 

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

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

NO

EU 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 occasions, listen to web radio instead of listening 

47 

48 

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  
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 

61 

   EN 

 
 
                                                 
to the "normal" radio. While it is true that television 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 listen 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 the main activity performed by Europeans in 2008 
(Figure 4), carried out by 24% of EU individuals and followed by listening to Web radios and 
/or  watching  Web  television  (20%).  Movie  downloading  is  also  a  very  common  activity. 
Playing networked games with others (7%) and activities requiring uploading of information 
(images, photos, videos or music) (12%) are not yet as widespread as content downloading. 
Only 7% of respondents have declared to have used peer-to-peer.  

Figure 4 

Content - I have used Internet, in the last 3 months, for

browser based news feeds (e.g. RSS) for reading new content on websites

6,5%

peer-to-peer file sharing for exchanging movies, music, video files

playing networked games with others

7,1%

7,2%

uploading self-created content (text, images, photos, videos, music, etc.)

11,6%

downloading and/or watching movies, short films or video files (other than via web
TV)

listening to Web radios and/or watching Web television

17,8%

20,0%

downloading and/or listening to music (other than via web radio)

23,7%

downloading/listening to/watching music and/or films

downloading/listening to/watching/exchanging/podcasting music and/or films

downloading/listening to/watching/playing music, films and/or games

27,6%

28,4%

30,6%

0%

5%

10%

15%

20%

25%

30%

35%

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 disparities between Member States. In the Netherlands or Norway, 
40%  of  citizens  listen  or  download  music,  and  in  16  other  countries  over  20%  do  so.  The 
difference with the laggards reaches up to 25 percentage points.  

49 

50 

Consumers can either "pull" the information they demand at their own request or receive information 
that is "pushed" by content suppliers  
According to iTunes, 8 of the top 10 movie downloads through this online shop in May 2009 were US 
productions. 

EN 

62 

   EN 

 
 
                                                 
I have used Internet, in the last 3 months, for downloading and/or listening to music (other than via 
web radio)

Figure 5 

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

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  platforms  now  account  for  around  20%  of  recorded 
music sales, up from 15% in 2007 (Figure 6). The digital music business in the world in 2008 
experienced  a  sixth  year  of  expansion,  growing  by  an  estimated  25%  to  US$3.7  billion  in 
trade value.  

Figure 6 

s
r
a
l
l

o
d
f
o
s
n
o

i
l
l
i

B

4

3.5

3

2.5

2

1.5

1

0.5

0

Global digital music revenues (2008)

25%

20%

15%

10%

5%

0%

s
e
u
n
e
v
e
r

i

l
a
t
i
g
d
f
o
%

2004

2005

2006

2007

2008

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  models  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, Spain, Sweden, Switzerland and the UK 

EN 

63 

   EN 

 
 
 
 
 
 
 
 
 
                                                 
based  on  sales  from  downloads  to  being  based  on  the  access  to  the  music  financed  through 
advertisement52.  These  models  are  based  on  subscription  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  growth  of  the  videogames 
sector.53 

5.3.2.  Online video 

Less than 20% of European citizens used the internet 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 significant 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  difference  with  the  laggards  reaches  up  to  20 
percentage points.  

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)

Figure 7 

35%

30%

25%

20%

15%

10%

5%

0%

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 most used device for video through the Web.. The 
YouTube  website  is  the  most  popular  access  to  video  streaming  (Table  1),  although  video 
streaming websites are not yet profitable54. 

52 
53 
54 

With the success of websites like Spotify  
NPD Group - IFPI Digital Music Report 2009 
According to Google's financial statements, Youtube has 1.65 million $ of daily losses.  

EN 

64 

   EN 

 
 
                                                 
Table 1: Number of videos viewed from the top three sites  
June 2008 (excl. ad-networks55) 

UK 

FRANCE  GERMANY 

USA 

YouTube 

YouTube 

YouTube 

YouTube 

(1.4 billion) 

(0.5 billion) 

(1 billion) 

(4.2 billion) 

BBC 

DailyMotion 

ProSieben 

MySpace 

(45 million) 

(0.3 billion) 

(40million) 

(0.5 billion) 

MSN 

TF1 

RTL 

Yahoo 

(22 million) 

(37 million) 

(32 million) 

(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  delivering  costs  together  with  low  paid  consumption. 
Unprofitability has led to the closing of several online stores in 2008. iTunes remains the most 
successful store, managing content over revenue-generating platforms such as the iPod digital 
media players as well as the iPhone.  

Against  this  background  the  video-on-demand  sector  is  still  growing  and  several  business 
models  are  being  tested  by  different  providers  in  almost  all  Member  States56.  256  services 
were  available  in  November  2008  through  a  variety  of  platforms:  Internet  (168  services), 
IPTV  (74  services),  cable  (23  services),  satellite  (12  services)  and  Digital  Terrestrial  TV  (1 
service). Business models range from free to subscription services, 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  model.  Most  of  the  services  are  restricted  to 
users  resident  in  certain  countries;  only  a  minority  is  open  to  a  supra  national  audience. 
France is the country where VoD services are most developed.  

Video on demand is considered by many as a competitor or a substitute for the rental or sale 
of DVDs. Recent evidence from some of the most developed markets shows however that the 
revenues generated from VoD services (mainly through the IPTV mode) remain modest and 
are unable to compensate for the decline in revenues from the sales and renting of DVDs. In 
France57, in 2008 revenues from DVDs totalled almost € 850 million (- € 88 million vs. 2007) 
while VoD (mainly through IPTV services) totalled € 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 

56 
57 
58 

An  ad –  network  is  a  company  that  connects  web  sites  that  want  to  host  advertisements,  for  instance 
video advertisement, with advertisers. 
European Audiovisual Observatory, 2008 Yearbook 
CNC, Bilan 2008 
UK Film Council, 2009 Statistical Yearbook 

EN 

65 

   EN 

 
 
 
 
                                                 
5.3.3.  Videogames  

Around  7%  of  Europeans  have  used  the  internet  (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).  

I have used Internet, in the last 3 months, for  for playing networked games with others

Figure 8 

16%

14%

12%

10%

8%

6%

4%

2%

0%

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 the introduction of generations 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  industry  account  to  48.3$  billion  in  2008  and  are 
projected  to  grow  to  68.3$  billion  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  subsidiary  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 increased, in the last year, due to the development 
of mobile broadband flat rates and casual gaming platforms such as AppStore. Casual gaming 
represents a major revolution in the videogame industry and expands its consumer base. The 
casual games sector drives a third of the industry's total revenues and is expected to account 
for half of it by 201260. 

59 
60 

IDATE Communications and Strategies, New Challenges for the video game industry, 1st Quarter 2009 
IDATE Communications and Strategies, New Challenges for the video game industry, 1st Quarter 2009 

EN 

66 

   EN 

 
 
                                                 
5.4. 

Conclusions  

The  diffusion  of  broadband  has  brought  about  rapid  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  payment  of  online  content;  they  are  generally 
unwilling to pay for many of the services, except 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 challenges to policy makers, regulators and industry. 
While  Europe  is  one  of  the  most  creative  regions  of  the  world  in  terms  of  production  of 
quality content and features high rates of broadband take up, it is not yet taking full advantage 
of digital content markets. American content and online shops have to a large extent cornered 
the market, raising revenues through online advertising, and experiencing success stories such 
as Appstore. 

For  Europe  to  successfully  compete  in  the  market  for  content,  solutions  to  these  problems 
need  to  be  found;  through  finding  innovative  and  sustainable  business  models  as  well  as  a 
favourable regulatory environment. 

EN 

67 

   EN 

 
Annex: Most Viewed websites 

Top 5 Internet sites per country may 200961 

Most visited 
websites per 
country May 2009
Belgium
Bulgaria
Czech Republic
Denmark
Germany
Estonia
Greece
Spain
France
Ireland
Italy

Cyprus
Latvia
Lithuania

Luxembourg
Hungary

Malta
Netherlands

Austria
Poland
Portugal
Romania

Slovenia
Slovakia

Finland

Google.be

Google.bg

Seznam.cz
Google på dansk

Google.de

Google.ee

Google.gr

Google.es

Google.fr

Google.ie

Google.it

1

2

3

4

5

Facebook.com Windows Live YouTube.com Skyrock

Vbox7.com

Google.com

Zamunda.net Abv.bg

Lide.cz
Facebook.com YouTube.com Google.com Windows Live

YouTube.com Szn.cz

Google.com

Google.com

YouTube.com Ebay

YouTube.com

Google.com

NETI

Wikipedia

Delfi

Facebook.com YouTube.com Google.com Yahoo!

Windows Live

YouTube.com Google.com Facebook.com

Skyrock

Google

Facebook.com Windows Live YouTube.com

YouTube.com Yahoo!

www.bebo.com

Facebook.com YouTube.com Windows Live Yahoo!

Google.com

YouTube.com

Facebook.com Windows Live Yahoo!

Google.lv

Google.lt

Google.lu

Draugiem.lv

Inbokss

One

Delfi

one.lt

Google.com

YouTube.com Delfi

YouTube.com

Facebook.com Google.com Windows Live

Google.co.hu

Iwiw.hu

YouTube.com Google.com Origo Freemail

Google.com.mt

Google.com

YouTube.com Facebook.com Windows Live

Google.nl

Hyves.nl

 Windows Live YouTube.com Google.com

Google.at

Google.pl

Google.pt

Google.ro

Google.si

Google.sk

Google.com

YouTube.com Facebook.com ORF ON

Nasza-klasa.pl

Onet.pl

Allegro

Wirtualna Polska

hi5

Yahoo!

Windows Live YouTube.com Sapo - Portugal Online!

YouTube.com hi5

Google.com

Google.com

Facebook.com YouTube.com 24 ur - Naslovnica

Azet.sk

YouTube.com Zoznam.sk

Google.com

Google.fi

YouTube.com

Google.com

Facebook.com IRC-galleria

Sweden
United Kingdom Google.co.uk

Google.se

YouTube.com

Google.com

Facebook.com Windows Live

Facebook.com Google.com

YouTube.com Yahoo!

United States
Japan

Google.com

Yahoo.co.jp

Yahoo!

FC2

China

Baidu.com

QQ.COM

Facebook.com YouTube.com Myspace
Google 日本
sina

YouTube.com 楽天 rakuten

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 

68 

   EN 

 
 
                                                 
It is interesting to note that most viewed websites 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 the 27 member States, showing that search is 
the  top  activity  on  the  web  and  therefore  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 country 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 weather forecasts among other services). 

Global top 10 websites (in terms of traffic) and their users 

Users of the 10 most visited websites

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Google

Yahoo!

YouTube

Facebook

Windows Live

MSN

Wikipedia

Blogger

Baidu

Myspace

USA

Rest of world

Source: Alexa.com, 13.05.2009 

EN 

69 

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6. 

ICT UPTAKE BY EUROPEAN BUSINESSES AND PRODUCTIVITY IMPACTS 

Economic theory attributes an important role to the ICT take up of businesses for increased 
efficiency, innovation and growth. Therefore, the 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 the 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 businesses over the period 2005 and 2008 show a mixed 
picture.  In  some  areas  significant  progress  has  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 (Figure 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  services  has  also  taken  place,  with  half  of  EU 
enterprises  using  the  internet  for  sending  filled  forms  to  the  public  administrations  in  2008, 
compared to 33% in 2005. This steep increase reflects 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 electronic 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 implementation of use of ICT in 
business processes, especially those involving relations with customers and suppliers, remains 
limited. 

Figure 1 

ICT use by enterprises (EU average, in 2008)

Access to broadband

e-Banking

Having a website

81%

78%

70%

62%

64%

61%

eGovernment (sending filled forms)

33%

50%

Buying online

28%

24%

Selling online

16%

12%

e-Commerce - weight of online turnover

12%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2005

2008

Source: Eurostat, Survey on ICT in enterprises (10+ employees, excluding the financial sector)  

EN 

70 

   EN 

 
 
Additional  evidence  on  e-commerce 
take-up  available  from  statistics  on  website 
functionalities  (which  does  not  account  for  enterprises  selling  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  added  to  customers.  In  particular,  while  57%  of 
websites contain product catalogues and/or price lists, 26% allow for online ordering/booking 
and  a  mere  10%  for  payment  (Figure  2).  Interactive  customisation  of  content  and  the 
possibility  to  design  products  tend  not  to  be  widespread  either  and  limited  to  slightly  more 
than  10%  of  websites.  Finally,  roughly  one  fourth  of  website  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 functionality is equal to 75% 
in the hotel industry and goes down to 33% and 19% in the trade and manufacturing sectors. 
The possibility to personalise content is relatively high in financial services websites (28%) 
and quite uncommon in the manufacturing sector (8%). 

57%

Figure 2 

60%

50%

40%

30%

20%

10%

0%

Availability of websites with specific functionalities
 (EU average, in 2008)

26%

26%

13%

11%

10%

Product catalogues or price
lists

Advertisement of available
jobs or online job
applications

Online ordering, reservation
or booking

Possibility for visitors to
customise or design
products

Personalised 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  advanced  solutions  aimed  at  supporting  enterprises 
business processes reveal the following (Figure 3):  

Use of ICT for the automation of internal business processes through the 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  partners,  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,  business  and  legal  ones  have  to  be  dealt  with, 
increasing the complexity of the exercise.  

EN 

71 

   EN 

 
 
Firm  size  is  still  an  important  factor  when  looking  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)

Analytical CRM

17%

37%

40%

Automatic linking of internal processes

70%

Supply chain automation

15%

Sending of e-invoices

9%

11%

32%

27%

Human resources application

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

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 shows that penetration of applications for supply 
chain automation is still relatively 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 information with suppliers is limited to 16% of businesses. In 
addition,  only  10%  of  businesses  in  manufacturing  industries  are  using  ICT  for  integrating 
vertically  along  the  supply  chain.  Companies  dealing  with  postal  services,  transportation, 
logistics  and  telecommunications  (transport  and  communication  sectors)  show  higher 
propensities  to  the  use  of  applications  enabling  the  automatic  detection  of  the  status  of 
delivery, though even here they are still 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  that  of  SMEs.  According  to  the 
"hub and spoke model"62, large enterprises tend to be connected with their business partners, 
often SMEs, through common networks in which they represent the centre. According to this 
model,  large  enterprises  have  sufficient  bargaining  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 common standard and afford building the network 
architecture with a negative impact on the take up of solutions for process automation. Data 

62 

63 

The  model  describes  a  value  chain  where  a  large  enterprise  (the  hub)  is  dealing  with  several  SMEs 
(spokes).  
This is the case, in particular, of large manufactures and retailers. 

EN 

72 

   EN 

 
 
                                                 
weighted  by  enterprise  size  reveal  that  the  impact  of  eBusiness  solutions  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.  

Electronic share of information along the supply chain (EU 2008)

Figure 4 

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

with suppliers on inventories,
production plans or demand
forecasts

with suppliers on progress of
deliveries

with customers on inventories,
production plans or demand
forecasts

with customers on progress of
deliveries

Whole economy

Manufacturing

Construction

Trade

Transport

Communication

Source: Eurostat, Survey on ICT in enterprises (10+ employees).  

ICT is expected to provide further benefits to businesses through the diffusion of more recent 
technologies  which  are  being  increasingly  deployed  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  transportation  –  from  vehicle  tracking  to  warehouse 
processes optimisation and reusable assets tracking – but also in passenger transportation, due 
to  the  increasing  deployment  of  RFID  in  contact  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 RFID 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 (enterprises comprising 70% of the workforce) while 
nearly  half  of  the  respondents  showed  usage  or  intended  use  of  RFID  for  labelling  single 
product  items  (47%  of  the  workforce).  Other  key  application  areas  include  person 
identification, production tracking and container or pallet tracking (Figure 6). This evidence 
suggests that benefits from RFID can be expected in the area of the supply chain, including 
logistics, transportation and inventory optimization. 

64 

Radio Frequency Identification  

EN 

73 

   EN 

 
 
                                                 
Figure 5 

25

20

15

10

5

0

14

6

5

Use of RFID applications in 2007 in selected sectors and EU MS
Enterprises comprising % of the workforce

24

20

10

2

1

4

3

5

3

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. 

RFID application areas (in % of RFID using companies)
Enterprises comprising % of the workforce

70

42

41

39

47

Figure 6 

80

70

60

50

40

30

20

10

0

person identification, for
example for access control,
location finding or tracking

inventory management

tracking products through
manufacturing, assembly or
other processes

container 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,  rather  than  an  instrument  for  increasing  the 
number of reachable customers and the related turnover of the enterprises (Figure 7). This is 
consistent  with  findings  on  ICT  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/services. Finally, large enterprises tend to be more positive when 
assessing the impact of ICT with respect to SMEs. 

EN 

74 

   EN 

 
 
 
Figure 7 

Perceived relevant benefits of ICT deployment (EU, in 2008)
% of enterprises for which the listed benefits are relevant

27%

41%

Reorganisation and simplification of work
routines

Release of resources

Development of new products and services

Higher earnings

20%

15%

18%

11%

10%

8%

8%

6%

15%

15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

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 used. In this respect, availability of ICT and eBusiness skills is a 
crucial factor. 

6.3. 

The economic impact of ICT: theory and evidence 

6.3.1.  The impact of ICT on productivity 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 contribute directly to productivity and growth 
through their own rapid technological progress; secondly, ICT use improves the productivity 
of other factors of production (or inputs); and thirdly, 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 divergent productivity experiences of the US and the 
EU and the identification of the 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  countries  that  constituted  the  Union  until  2004  experienced  a 
productivity growth slowdown between these two periods (from 2.4% to 1.5%). Most of the 

65 
66 

DE, FR, IT UK, NL, SE, CZ, IE, AT  
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 

75 

   EN 

 
 
                                                 
 
economic  literature  attributes  these  divergent  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 outdated and inflexible industrial structure: with 
an excessive  focus on low-medium technology industries, slow to adjust to the pressures of 
globalisation and of rapid technological change. This resistance to change contributed to the 
slow adoption of ICT and their integration into the business process in Europe. 

In the mid-90s, the US experienced a productivity 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  changes  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  contributions  from  investment  in  ICT  and  from 
ICT-producing industries (due to a smaller share 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 efficiency of the production process. "Multifactor 
productivity  growth"  (which  measures  the  joint  influences  on  economic  growth  of 
technological change, efficiency improvements, returns to scale and other 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  productivity  growth  in  market  services,  such  as  trade,  finance  and 
business services, than the EU. 

Therefore, for Europe to increase its productivity potential, and benefit from ICT, it needs to 
find mechanisms to exploit service innovations for greater efficiency gains, and a new model 
of  innovation  and  technological  change,  with  greater  emphasis  on  human  capital, 
organisational  change  and  other  intangible  investments,  to  make  use  of  its  own  innovative 
capabilities.  Further,  a  more  flexible  approach  towards  labour,  product  and  capital  markets 
would allow resources to flow to their most productive 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 technical progress allows 
firms  to  produce  the  same  output  with  less  input  –  and  especially  less  labour  –  leading  to 
“technological  unemployment.”  This  opinion,  based  on  the  assumption  that  the  output  of 
economies  remains  fixed  over  time,  does  not  find  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 

76 

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The recent Commission study (2008): "The Impact of ICT in employment"68, clearly indicates 
that according to economic theory the long term  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 depend 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 level in EU Member States, US and Japan69 is 
in line with the theoretical 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  highly  dispersed  around  a  small  negative 
number and in most cases statistically not significant70. 

Hence,  there  is  no  evidence  that  ICT  systematically  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 the 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 sector 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 automation of internal business processes through the 
automatic  exchange  of  information  and  for  the  management  of  human  resources  is  quite 
common,  especially  among  large  enterprises.  But  eBusiness  applications  enabling  the 
automatic  link  with  business  partners,  including  those  automating  the  supply  chain  and  the 
transmission of invoices, are still used by a minority of EU enterprises. 

A weak take-up of ICT solution which enhances efficiency standards, in particular by SMEs, 
raises concerns in terms of productivity impacts. Policy efforts in terms 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 

69 
70 

Available at:  
http://preprod.europa.infso.cec.eu.int/information_society/eeurope/i2010/docs/benchmarking/impact_of_ict_on_em
ployment.pdf 
Data available within the EU KLEMS project. 
ICT is measured as the ratio between ICT investments and output (ICT/Y). A coefficient of one means 
that, by increasing ICT/T by 1%, employment would increase by 1% too. 

EN 

77 

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7. 

DEVELOPMENTS IN NATIONAL ICT POLICIES

71 

One of the major successes of i2010 is that it has lead to the mainstreaming of ICT policies. 
Member  States  have  increasingly  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 such 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 ICT in their economies. 

7.1. 

Overview of main ICT policy priorities and developments across Member States 

Member  States  with  national  ICT  strategies  include  Bulgaria  ('Programme  for  the 
Development  of  Information  Technologies'),  Cyprus  ('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  development  till  2013'),  Portugal  ('Connecting 
Portugal'), Slovenia ('Strategy for the Development of the Information Society in the Republic 
of Slovenia (si2010)'), Spain (the 'AVANZA plan'), and the UK ('Digital Britain'). 

Many  of  these  strategies  follow  or  have  similar  goals  to  that  of  the  i2010  initiative.  Box  1 
provides an overview of Member States' strategies. 

Box 1: An overview of EU Member States national ICT strategies 

A total of thirteen EU Member States currently 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 for 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  Programme  for  the  Development  of  Broadband 
access. They are aimed at systematising the efforts 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  Strategy for the Information Society, the main 
target  of  which  would  be  to  exploit  the  opportunities  provided  by  Information  and 
Communication  Technologies  for  improving  competitiveness  of  all  sectors  of  economic 
activity.  For  this  objective  the  following  measures  will  be  promoted:  appointment  of  a 
Commissioner  for  Information  Society;  creating  an  appropriate  institutional  and  regulatory 
framework for executing various  activities via Internet; improving  conditions of  safe access 
and safe transactions via Internet; changing the way of thinking and culture of the population 
and  introducing  both  ICT  and  Internet  into  everyday  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 

78 

   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  society  in  every  possible  way  and  actively  participating  in 
public life ("nobody will stay or will 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 the best ICT countries by 2012, by 
providing  100%  coverage  of  fixed  and  mobile  broadband  and  introducing  digital  television. 
The plan rests on four priorities: (1) to provide access of the whole population to the internet 
and digital services, (2) to develop the production and supply of digital 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  society  development,  the  key  measures  will  be 
directed towards developing the following: information 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 perform 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 improved quality of life through ICT. These two 
strategic  objectives  are  further  decomposed  into  six  sub  objectives:  to  boost  ICT  uptake  by 
businesses; offer a large number of digital services to businesses; support the ICT sector as a 
pillar of the Greek economy; improve citizen welfare through ICT; and develop e-services for 
the  citizen.  (The  Greek  Digital  Strategy,  Ministry  of  Economy  and  Finance,  Special 
Secretariat for Digital planning). 

Ireland is developing a 'National Knowledge Society Strategy' focused on the development of 
its  knowledge  economy  in  order  to  help  accelerate  the  development  of  knowledge-intense 
areas  such  as:  digital  traded  services;  eLearning  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  the  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 investing in people and nurturing their skills and 
potential;  using  IST  to  improve  quality  of  life;  re-inventing  government  by  transforming 
public service delivery and governance; enhancing 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 for economic growth. (Malta NRP, p82). 

Poland's  current  digital  strategy  is  the  'Computerization  Plan  for  Poland  in  2007-2010'.  A 
new  strategy  is  also  being  formulated  for  the  period  up  to  2013:  'Strategy  for  Information 

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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  through  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 priority in the 2009-2010 period to R&D activities in the area of 
information  and  communication  technologies  and  to  eScience  instruments;  this  includes  the 
high performance network for research and education, digital scientific libraries, the opening 
access information and scientific data stores and the Grid computing super computing and the 
work platforms for distance research. 

Slovenia  has  developed  a  'Strategy  for  the  Development  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 initiative. 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 individual. The main objective of the Strategy is to 
promote further the development of the information society, which will have a considerable 
impact  on  increasing  efficiency  and  innovation  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 convergence with the European Union in the 
field of Information Society. The plan comprises a series of specific programmes focused on 
citizens,  companies,  the  digital  context,  digital  public  services  and  eAdministration.  Also 
since  the  end  of  2008,  the  implementation  of  the  'AvanzaDos  Plan'  has  begun  with  new 
strategic  lines  for  developing  the  information  society  for  the  period  up  to  2012.  In  view  of 
problems finding locations for mobile telephony antennas, one of the plan's proposals within 
the  framework  of  boosting  infrastructure  is  to  reward  local  governments  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  assist  the  development  of  next  generation 
broadband to those areas that will not benefit from commercial deployments; to enable Britain 
to  be  a  global  centre  for  the  creative  industries  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 digital economy, and that all 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  national  ICT  strategy  or  not,  the  types  of  ICT 
initiatives  employed  are  often  similar  across  countries.  Though,  their  depth  and  complexity 
differs,  to  some  extent,  depending  upon  their  state  of  ICT  advancement,  both  generally  and 
within specific areas. 

EN 

80 

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Priority  areas  include,  in  particular,  the  diffusion  of  Broadband  infrastructure  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  digitalisation  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  prioritised  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 ranking of these policies and the Member States 
involved in them. 

Table 1 :Ranking of policies and MS engaged in them: 

1. 

Infrastructure and Broadband diffusion: 

2. 

eGovernment: 

3. 

eLearning/ICT in Schools 

AT,  BE,  BU,  CY,  CZ,  DE,  DK,  EST,  FI,  FR, 
EL, ES, HG, IE, LT, LI, LU, MT, NL, PL, RO, 
SI, SK 

AT, CY, CZ, DE, DK, EST, FI, FR, EL, ES, IT, 
LT, MT, NL, PL, RO, SI, SK, UK 

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: 

11.  Green ICT: 

CZ, ES, PL, SI 

DK, IE and LU 

12.  Harmful content/protection of minors 

FI 

7.2. 

Specific ICT policies 

Countries'  ICT  policies  can  be  broadly  grouped  into  three  main  types  of  policies.  The  first 
covers policies devoted to infrastructure deployment, the second 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  coverage  of  broadband 
throughout  their  economies.  In  particular,  an  increasing  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)  Ireland  (2010),  Latvia  (2010)  and  Slovenia 
(2010).  The  United  Kingdom  proposed  a  commitment  to  universal  service.  In  addition, 

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81 

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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 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Coverage of DSL networks as % of population, December 2008

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 RO

.
a
.
n

Total

Rural

Source: IDATE 

With regard to increasing the availability of broadband in schools many Member States have 
dedicated policies. In Belgium, a project called 'Cyberclasses' was initiated in 2008 to equip 
all  schools  in  the  French  speaking  community  with  computers,  servers  and  broadband 
(ADSL) within two years.72 Other Member States with policies to implement and/or upgrade 
ICT infrastructure in schools include Cyprus, Estonia, France, Greece, Spain, Ireland, Latvia, 
Malta, the Netherlands and the United Kingdom. Slovakia plans a policy in this area. 

A  number  of  Member  States  are  also  making  efforts  to  increase  the  coverage  of  wireless 
networks,  particularly  in  urban  regions,  for  example  with  the  implementation  of  wireless 
hotspots  (RO  and  EL).  Indeed  in  Finland,  wireless  broadband  coverage  is  expected  to  be 
available to the whole population 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-access and remote areas) 
and ensure fully reliable connections; higher speeds and lower costs for users/consumers. 

Policies are also being implemented 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/strategies  designed  at  the  reorganisation  of  their  radio  spectrum  in 
order to increase the efficiency of its use, either to make the way for mobile digital television 
and/or  to  allow  for  the  further  development  of  broadband.  Some  countries,  such  as  Spain, 
have  actively  encouraged  the  diffusion  of  mobile  telephony  antennas  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. 

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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  network  investments  are  limited  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 has 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 broadband available to the whole population by 2015. Luxemburg 
is  also  investing  in  such  networks.  Slovenia  states  its  intentions  to  develop  fibre  optic 
networks. In Greece, in September 2008, a project for developing Next Generation Networks 
based on fibre optic technologies for the establishment of an open access network providing 
high  speed  connections  (100  Mbps  minimum)  was presented, thus, allowing for the gradual 
interconnection of more than 1.5 million residences. 

Other infrastructure projects include the setting up of public access points in some Member 
States  (e.g.  in  HU  (rural  and  socially  disadvantaged),  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 supercomputer 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 provision of infrastructure, Member States are implementing a range 
of policies designed at increasing the up-take and use of broadband and ICT more generally 
by various sections of society. 

Member States believe that an important way to encourage a general increase 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 eLearning73, 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, improving 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  including  broadband  access,  a  computer  and  attending  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  motivation;  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. 

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evaluated and where necessary fine-tuned at the end of 2008 and 2009. Its implementation is 
intended as a response to the EU e-Inclusion 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 the unemployed and inactive, the disabled and women. They 
include the 'Smart Start' initiative, designed to help the unemployed, those on social benefit, 
the disabled and non-profit organisations 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  Telécommunications  (AWT)  has  developed  an  awareness 
raising strategy aimed at encouraging the use of ICT in SMEs. 

In the Czech Republic, the 'Operational Programme Enterprise and Innovation' is designed to 
foster  the  development  of  SMEs  which  plan  to  invest  in  information  and  communication 
technologies; through making use of EU funds. The programme 'ICT in Enterprises' provides 
support  to  entities  that  are  planning  to  upgrade  their  information  systems  to  increase  the 
effectiveness  of  their  internal  operations  (e.g.  production,  ordering  or  stock  control)  and 
improve  their  external  relations  (with  customers,  suppliers  or  public  administration  bodies 
etc.).  In  addition,  the  programme  'ICT  and  Strategic  Services'  is  designed  for  firms  who 
decide to purchase or construct a building and employ developers and programmers with the 
aim to develop or upgrade ICT products and services. 

In Spain, the government signed 39 agreements 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  Plan,  Hungary  has  set  up  an  SME  training  and 
motivation programme. The programme includes a series of actions designed to strengthen the 
digital maturity of SMEs and remove barriers to ICT introduction and use. On the one hand, 
the aim is to train SME owners and executives, increase their demand for ICT equipment and 
services  and  raise  awareness  of  the  importance  of  ICT.  On  the  other  hand,  it  aims  at 
implementing  organisational  structural  changes  and  management  developments  to  promote 
the wider scope use of ICT equipment by SME owners and executives. Trainings to be held 
within  the  framework  of  the  action  aim  to  encourage  company  executives  to  invest  in  ICT 
equipment by demonstrating how company processes 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  implementation  of  policies  in  the  area  of  eGovernment 
and the i2010 eGovernment Action Plan, which was approved by the Council of Ministers in 

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June 2006 and has already concrete impact throughout Europe. Within national governments, 
common  policies  include  the  expansion  of  office  automation,  the  digitalisation  of  public 
administration,  the  networking  of  national  governmental  departments  as  well  as  between 
central  and  local  authorities  and  the  implementation  of  electronic  public  procurement 
(eProcurement).  eProcurement  was  identified  as  a  particularly  important  "high  impact 
service". In this respect, Governments 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 scale pan-European pilot projects on electronic 
public procurement and the authentication of electronic identities in order to combat risks of 
fragmentation  of  the  internal  market  due  lack  of  interoperability  of  information  and 
communication 
to  better  cooperation  between 
administrations, also beyond national borders. 

technologies.  This 

the  first  step 

is 

With regard to the provision of public services, and communication between government and 
the  general  public,  many  Member  States  have  set  up  or  are  setting  up  'one-stop-shops'  for 
citizens  and  businesses  and  points  of  single  contact  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  submission  of  tax  declarations.  In 
some countries, they are introducing systems of data repositories for communication between 
individuals  and  companies  and  state  bodies.  Finally,  the  majority  of  Member  States  have 
policies  for  the  implementation  of  eParticipation  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  policies  are  being  implemented  as  part  of  a  package  of 
measures designed at achieving efficiency gains, reducing administrative burden and cutting 
'red  tape'.  In  particular,  the  move  to  electronic  registration  of  companies  is,  in  many  cases, 
seen  as  a  way  of  encouraging  entrepreneurship  (by  reducing  the  time  it  takes  to  set  up  a 
business),  making  company  information  available  to  citizens  across  the  EU  and,  therefore, 
meeting commitments made in this regard. 

At  the  same  time  as  developing  eGovernment,  Member  States  have  also  been  working  on 
improving  the  conditions  for  electronic  communications  between  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 particular eSecurity (Box 2). 

Box 2: eSecurity in Austria 

In Austria, since January 2008, the social security eCard can be registered over the Internet as 
a  'Bürgerkarte'  and  authenticated  for  the  purposes  of  electronic  signature.  This  was  made 
possible through a simplification of the 'Signaturgesetz' (the law governing signatures), which 
took  place  together  with  a  number  of  other  legal  changes  introduced  to  enable  the 
development of eGovernment. These changes also made it possible to use the card for private 
transaction  authentication  with  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 encryption for the transmission of sensitive data. 

Further to the 'Bürgerkarte' a new software programme 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 

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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  delivery  of  documents  and  dual  document  delivery 
(electronic and paper), and the development of an eSecurity handbook.  

In  their  National  Reform  Plans  (NRP's),  a  number  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 hospitals with new computers  (ES), developing national health 
information systems (CY, EE, EL and PL), setting 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), electronic health cards (EL) and setting up of electronic medical 
files (EL and ES). In addition, Greece is implementing 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  include  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  increasing  the  number  of  computers  and  their 
connection  to  the  internet,  interconnecting  schools  via  Intranet,  developing  an  electronic 
system  providing  parents  with  information  on  their  child's  performance  and  attendance  etc. 
and  providing  continuous  training  to  teachers  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 started in 2008 on the 'Utilisation of Information and 
Communication Technology in Education and Study' 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 via 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  broadband  ('DIODOS'),  to  subsidise 
the  purchase  of  laptops  for  top  ranking  first  year  students  ('See  your  life  digitally'),  a  pilot 
project  (starting  in  2009)  to  provide  specially  designed  laptops  to  school  pupils  aimed  at 
getting them acquainted with new technologies early on ('A laptop per student'), 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 equipment in almost 9,000 schools, benefiting 2.5 
million  students  (around  45%  of  the  student  population).  Also,  the  'Networked  Campus 
Programme'  provides  public  universities  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 

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education  materials,  establishment  of  an  interactive  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, including 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/protection of minors (FI) 
and Quality of life/flexible working arrangements/teleworking (EE). 

7.3. 

Conclusions 

The  information  provided  by  National  authorities  in  their  National  Reform  Programmes 
shows that Member States across the EU have recognised the important role played by ICTs 
in our modern Knowledge-based societies. ICT policies have come to the forefront of national 
policy  making,  being  integrated  into  many  different  areas  of  policy  and  increasingly 
formulated as part of larger-scale national ICT strategies with similar objectives to that of the 
i2010  initiative.  Policies  have  largely  been  focused  in  three  main  areas:  infrastructure 
provision  to  achieve  complete  coverage  of  the  population,  in  particular  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 build 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  key  driver  of  economic  growth  and  social 
change.  A  wealth  of  evidence  shows  that  ICT  is  an  important  source  of  productivity, 
innovation  and  growth, 
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 climate change, energy efficiency and an ageing 
population.  As  such,  ICT  is  at  the  very  heart  of  the  Lisbon  strategy  and  essential  to  its 
success. 

increasing  our  competitiveness,  creating 

In  times  of  economic  and  financial  crisis,  it  is  important  that  this  key  role  of  ICT  is  not 
forgotten. Investments in ICT are 'smart' investments; helping to create and maintain jobs and 
growth  now,  and  emerge  from  the  crisis  stronger  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  longer  term,  they  increase 
efficiency, lead to innovation and make the whole economy more competitive. 

In  the  current  economic  situation,  pressure  on  national  budgets  and  private  financing  may 
slow down the rate of planned ICT investment. Community funding can contribute to support 
public  investment.  Under  Cohesion  Policy  programmes,  €15.2  billions  are  foreseen  for 
investment in ICT in the period 2007-13. These programmes should be accelerated to give a 
timely boost to public ICT investment at the national, regional and local level. 

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If we are serious about the Lisbon ambition for a "dynamic, knowledge-based society" , we 
must  invest  (as  least)  as  much  in  the  information  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  has  been  recognised  in  the  European  Economic 
Recovery package, which foresees up to 1.02 billion 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  towards  a  more  sustainable  future,  by  reducing  our 
environmental impact, increasing our energy efficiency and creating a more inclusive society. 

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8. 

THE IMPACT OF THE ECONOMIC DOWNTURN ON THE ICT SECTOR  

In  the  second  half  of  2008,  the  dramatic  worsening  of  the  financial  crisis  led  to  severe 
disruptions  in  credit  intermediation  and  a  significant  fall  in  consumer  and  business 
confidence. As the financial crisis intensified last Autumn, economic  indicators deteriorated 
and global economic activity fell sharply during the last quarter of 2008, with historical drops 
in trade and production. The economic outlook remains 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  downturn  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 slightly negative, at -0.1% both in the EU and 
in the euro area. Inflation is expected to continue to fall rapidly this year, entering negative 
territory  for  a  few  months  in  the  middle  of  the  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 debts 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 Gartner (March 2009) shows that the 
economic crisis is having a major impact on the ICT sector in Europe. While in December the 
sector seemed to be holding up quite well compared to other sectors, latest forecasts project a 
strong downturn. In Western Europe, total end-user spending on ICT is now expected to fall 
8%  in  2009  and  to  remain  flat  in  2010  before  increasing  to  3  percent  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  downturn  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 forecasts are being frequently updated and include a high 
element  of  uncertainty  about  the  length  and  the  severity  of  the  economic  downturn.  Thus,  estimates 
provided in what follows should be treated with caution. 

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End-user spending on ICT by Region
(% change on previous year)

Figure 1 

10

8

6

4

2

0

-2

-4

-6

-8

-10

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 spending in computer hardware is expected to 
fall sharply in 2009 (-15%), revising its December 2008 forecast (-5%). A 1% rebound of the 
same  market  is  expected  in  2010.  The  forecast  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  market  is  expected  to  continue  contracting  in  2010 
before  recovering  modestly  in  2010.  In  Eastern  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 sentiment 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),  global  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 
76 

77 

FT, 9.2.2009: http://www.ft.com/cms/s/0/855ae2ce-f648-11dd-a9ed-0000779fd2ac.html 
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.  
NACE 30: Computer and office machines. Seasonally adjusted values. 

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respectively,  in  2009.  In  2010,  however,  software  sales  are  expected  to  show  a  marked 
recovery, recording growth rates 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 profitability might push businesses to invest in 
solutions leading to better process efficiency. Furthermore, regulation in the financial sector is 
expected to have a positive impact on demand for software. 

In 2008, the European telecom service 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  was  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  basic  telecom  services,  increasingly  offered  at  flat 
rates) as well as to relatively low debt levels. 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  easily  dropped  from  consumption 
habits. 

The economic deterioration in 2009 however is expected to put further downward pressure on 
investment and consumer spending with the risk of postponing the launch and the take-up of 
new  and  innovative  services.  A  contraction  in  revenues  in  2009  is  however  to  be  expected. 
According to Gartner (March 2008) growth in consumption of telecom services 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 return 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 looking for improvements in  average revenue per 
user  through  deployment  of  new  services,  cuts  in  operational  expenditure  by  means  of  next 
generation networks deployment, and investment in dynamic economies in Eastern Member 
States  or  in  emerging  economies  like  South  America.  In  future,  however,  lower  spending 
capacity by businesses and households may slow the adoption of new services (as consumers 
rationalize spending plans to focus on core telecom 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  broadband.  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  growth  in  the  first  quarter  of  2009  of  18% 
(nevertheless,  down  from  37%  in  Q1  2008),  eBay  had  experienced  a  negative  rate  of  -8% 

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(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 actually 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 crisis on the market for online advertising 

Online advertisement is the main source of revenues 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 growing, though at a slower pace than hitherto. 

Online advertising market 

 €

n
o

i
l
l
i

B

70

60

50

40

30

20

10

0

2005

2006

2007

2008

2009e

2010e

2011e

2012e

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  investments  will  be  down,  thanks  to  higher 
accountability and to innovative formats.  

The global online advertising market had a net worth of €30.6 billion in 2008, and will climb 
to  €58.8  billion  in  2012  –  accounting  for  15%  of  advertisers’  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. 

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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  beneficial  for  the  Web.  As  consumers  are  spending 
more  time  at  home,  consumption  of  the  internet  and  media  may  increase.  Moreover,  search 
activities on the web are driving Internet advertising growth as consumers are shifting from 
premium to value products and look for bargains. 

Indeed,  the  reasons  for  the  sustained  growth  of  the  online  advertising  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  possibilities  of  the  web  and  of  digital  content. 
Expenditure in advertising based on location through 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 advertising (driven by companies like Google, Yahoo and 
Microsoft).  Search  marketing  will  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  world.  Display  share  of  the  global  market  will 
stabilise at around 36% thanks to the development 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-mouth 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 applications were downloaded from "App Store", its 
internet  based  shop,  half  of  them  in  the  last  quarter  (with  an  estimated  value  of  €149.5 
million)78. App store sells five million applications through the web per day. 

The  reasons  behind  the  success  are  the  big  supply  coming  from  third-parties  (Apple  retains 
30% of the revenues coming from these applications while the rest goes to the developer) and 
the simplicity of the interface. However, the company makes the bulk of its revenues from the 
sales  of  devices  and  not  from  the  sale  of  content.  It  is  interesting  to  note  that  the  digital 

78 

Needham & Co 

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content (for instance videogames developed by third-parties) is being used as a tool to create 
value  for  the  product.  It  is  estimated  that  without  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 network equipment, with 
around  70%  of  the  worldwide  market,  leveraging  on  their  technological  leadership  and 
multinational presence. However, the rapid deterioration 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 positive rates of growth forecast for 2009 at the 
end of last year. While a slowdown in global sales of mobile handsets (-7%) can be blamed 
for  most  of  the  decline,  expenditure  in  infrastructure  equipment  (-3%)  is  also  expected  to 
decline.  

Nonetheless,  views  on  the  impact  of  the  current  climate  on  growth  are  diverging.  With  the 
exception of Ericsson, both Alcatel-Lucent and Nokia Siemens Networks have seen negative 
annual  growth  rates  in  revenues  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 others 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 manufacturers may expect a bad financial year in 
2009,  there  are  diverging  views  on  how  increasing  traffic  in  mobile  broadband  and 
investment 
in  next  generation  fixed  broadband  access  will  spur  demand  for 
communications infrastructure 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 company in the segment. Its low prices, in part related to the 
strength  of  the  euro,  may  represent  a  further  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  downturns  and  recovering  quickly  in  upturns)  and 
the current slowdown is no exception. According 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 handsets. Semiconductor companies have already cut 

79 
80 

Global Equities Research 
Infrastructure  equipment  is  divided  into  seven  major  segments:  access,  switching,  routing,  transport, 
business support systems, operations support systems and mobile infrastructure 

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their  production  by  closing  some  facilities  or  by  lowering  the  utilisation  rate  and  are 
tightening  inventory  control.  This  should  have  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  expected  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 industry 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  many  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  and  decreased  access  to  financing  on  the  capital 
markets. Other important players are also suffering severely from the crisis. 

8.2. 

Conclusions 

This chapter has analysed he extent of the impact of the economic crisis on the ICT sector. 
The analysis, which is based on market data, shows 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 Europe, 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 Europe, 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  (manufacturing)  will  be  more  strongly  hit  than  others 
(software).  The  telecom  equipment  industry,  which  is  Europe's  traditional  strength,  and 
semiconductors are being hit by the 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 dominated, 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 crisis 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.  

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Table 1: GDP at constant prices (annual % change) 

Annex 

Forecasts 
2009 
2007 
-3.5 
2.8 
BE 
-5.4 
2.5 
DE 
-9.0 
6.0 
IE 
-0.9 
4.0 
EL 
-3.2 
3.7 
ES 
-3.0 
2.2 
FR 
-4.4 
1.5 
IT 
0.3 
4.4 
CY 
-3.0 
5.2 
LU 
-0.9 
3.9 
MT 
-3.5 
3.5 
NL 
-4.0 
3.1 
AT 
-3.7 
1.9 
PT 
-3.4 
6.8 
SI 
-2.6 
10.4 
SK 
-4.7 
4.5 
FI 
-4.0 
2.7 
€ area 
-1.6 
6.2 
BG 
-2.7 
6.0 
CZ 
-3.3 
1.6 
DK 
-10.3 
6.3 
EE 
-13.1 
10.3 
LV 
-11.0 
8.9 
LT 
-6.3 
1.1 
HU 
-1.4 
6.7 
PL 
-4.0 
6.2 
RO 
-4.0 
2.5 
SE 
-3.8 
3.0 
UK 
-4.0 
2.9 
EU 
-2.9 
2.0 
US 
JP 
-5.3 
2.4 
Source: European Commission Spring Forecast, May 2009 

Estimates 
2008 
1.2 
1.3 
-2.3 
2.9 
1.2 
0.7 
-1.0 
3.7 
-0.9 
1.6 
2.1 
1.8 
0.0 
3.5 
6.4 
0.9 
0.8 
6.0 
3.2 
-1.1 
-3.6 
-4.6 
3.0 
0.5 
4.8 
7.1 
-0.2 
0.7 
0.9 
1.1 
-0.7 

2006 
3.0 
3.0 
5.7 
4.5 
3.9 
2.2 
1.8 
4.1 
6.4 
3.2 
3.4 
3.4 
1.4 
5.9 
8.5 
4.9 
2.9 
6.3 
6.8 
3.3 
10.4 
12.2 
7.8 
4.1 
6.2 
7.9 
4.2 
2.8 
3.1 
2.8 
2.0 

Forecasts 
2010 
-0.2 
0.3 
-2.6 
0.1 
-1.0 
-0.2 
0.1 
0.7 
0.1 
0.2 
-0.4 
-0.1 
-0.8 
0.7 
0.7 
0.2 
-0.1 
-0.1 
0.3 
0.3 
-0.8 
-3.2 
-4.7 
-0.3 
0.8 
0.0 
0.8 
0.1 
-0.1 
0.9 
0.1 

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Table 2: Number of unemployed (as % of the labour force) 

Forecasts 
2009 
8.5 
BE 
8.6 
DE 
13.3 
IE 
9.1 
EL 
17.3 
ES 
9.6 
FR 
8.8 
IT 
4.7 
CY 
5.9 
LU 
7.1 
MT 
3.9 
NL 
6.0 
AT 
9.1 
PT 
6.6 
SI 
12.0 
SK 
8.9 
FI 
9.9 
€ area 
7.3 
BG 
6.1 
CZ 
5.2 
DK 
11.3 
EE 
15.7 
LV 
13.8 
LT 
9.5 
HU 
9.9 
PL 
8.0 
RO 
8.4 
SE 
8.2 
UK 
EU 
9.4 
Source: European Commission Spring Forecast, May 2009 

Estimates 
2008 
7.0 
7.3 
6.3 
7.7 
11.3 
7.8 
6.8 
3.8 
4.9 
5.9 
2.8 
3.8 
7.7 
4.4 
9.5 
6.4 
7.5 
5.6 
4.4 
3.3 
5.5 
7.5 
5.8 
7.8 
7.1 
5.8 
6.2 
5.6 
7.0 

2007 
7.5 
8.4 
4.6 
8.3 
8.3 
8.3 
6.1 
4.0 
4.1 
6.4 
3.2 
4.4 
8.1 
4.9 
11.1 
6.9 
7.5 
6.9 
5.3 
3.8 
4.7 
6.0 
4.3 
7.4 
9.6 
6.4 
6.1 
5.3 
7.1 

2006 
8.3 
9.8 
4.5 
8.9 
8.5 
9.2 
6.8 
4.6 
4.6 
7.1 
3.9 
4.8 
7.8 
6.0 
13.4 
7.7 
8.3 
9.0 
7.2 
3.9 
5.9 
6.8 
5.6 
7.5 
13.9 
7.3 
7.0 
5.4 
8.2 

Forecasts 
2010 
10.3 
10.4 
16.0 
9.7 
20.5 
10.7 
9.4 
6.0 
7.0 
7.6 
6.2 
7.1 
9.8 
7.4 
12.1 
9.3 
11.5 
7.8 
7.4 
6.6 
14.1 
16.0 
15.9 
11.2 
12.1 
7.7 
10.4 
9.4 
10.9 

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9. 

R&D IN ICT AND THE WORLD ECONOMIC CRISIS 

R&D is the main driver of innovation and technological change, and as such, it is the main 
determinant of long-term productivity growth and 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 ICT research in the EU27 Member States. A distinction is made 
between business spending and governmental funding, 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  competitors.  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 effort (R&D spending relative to total sales) in 
the two economic areas is very similar.  

This is why in a second step the country-based 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  sectors,  a  fallback  is  observed  following  the  dotcom 
bust in the beginning of the 21st 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 (including a reduction in venture 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 particular 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  additional  insights  on  the  economic  role  that  ICT 
R&D  plays  in  the  EU  Member  States.  The  latest  available  evidence81  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 about 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 enhancing technologies, hence contributing directly and indirectly 
to increasing labour productivity and EU competitiveness.  

81 

82 

JRC-IPTS Report: "The 2009 Report on R&D in ICT in the European Union" (Turlea 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.  
2005 figures, the latest available. 

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Figure 1 

Share of ICT in EU total BERD (2005)

Other sectors
30.3%

ICT
26.4%

Aerospace
7.1%

Pharmaceutical and 
biotechnology
13.0%

Automotive
15.3%

Machinery and equipment
7.9%

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 economies, are the biggest spenders. When relating 
R&D  to  the  size  of  the  different  economies,  a  different  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 Union83, 
and  structural  and  knowledge  economy  indicators  in  these  countries  are  showing 
improvements, which in return could increase the attractiveness of foreign direct investment 
(FDI)84.  

83 

84 

This is not the case for four new Member States (Bulgaria, Poland, Malta and Slovakia), for which the 
gap with the rest of Europe is actually increasing.  
Report on a DG JRC-IPTS Workshop: "Raising Private Sector R&D in the New Member States: Does it 
help their economies catching up?" (Seville, 13.12.2007)  

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Contribution of the ICT sector to total intensity (BERD / Value Added)  by Member State (2005)

Figure 2 

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

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

RO

Contribution 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  and  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  twice  as  high  across  the  Atlantic, 
creating  a  gap  of  €33  billion 85.  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 

3

2.5

2

1.5

1

0.5

0

Contribution of the ICT sector to total BERD intensity (2005, %)

1.59

0.82

1.04

1.25

Japan

Korea

1.21

0.61

US

0.85

0.31

EU27

0.88

0.17

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 rate is not necessarily a result of individual 
EU ICT companies spending less on R&D than their 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 

100 

   EN 

 
 
 
                                                 
the  company  R&D  effort  (intensity)  is  similar  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, compared to 0.04% in Europe (Figure 4).  

Figure 4 

120

100

80

60

40

20

0

Public expenditure on R&D in billions of euro  and as share of GDP (%) (2005)

77.23

4.45

EU27

0.7

0.04

EU27

100.45

10.58

US

0.96

0.1

US

1.2

1

0.8

0.6

0.4

0.2

0

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  Surveys,  the  ICT  sector  is  one  of  the  most  collaborative 
sectors  after  energy  and  chemicals  industries.  Among  innovative  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 based on spending data reported by companies in 
their annual reports. In general, this kind of data does not provide information about the place 
where  R&D  is  actually  performed.89  The  most  recent  available  data  are  the  2008  annual 
reports and the first quarterly reports of 2009 (Q1 2009). 

86 

87 

88 
89 

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 
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 
OECD, using the 2007 European Community Innovation Survey 
The company’s whole R&D investment is attributed to the country in which it has its registered office. 

EN 

101 

   EN 

 
 
                                                 
The database that is used is the EU Industrial Investment Scoreboard. This database presents 
information  on  2000  companies  from  around  the  world  on  R&D  investments.  The  set  of 
companies it covers comprises the top 1000 R&D investors 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,  semiconductors  and  software.  Their  R&D  spending 
amounts to more than 90% of the ICT R&D total. The remaining ICT segments are computer 
services,  internet,  computer  hardware  and  electronic  office  equipment,  with  significantly 
lower R&D rates. 

These  figures  reflect  the  strengths  and  weaknesses  of  the  European  ICT  industry.  For 
example, there is little left of the computer hardware industry and Europe is nearly absent in 
the  Internet  industry,  in  which  companies  like  Google,  Yahoo  or  MSN  have  acquired 
seemingly unchallengeable positions. The telecom equipment industry is Europe's traditional 
ICT strength. Europe has also world leaders 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, two important elements must be kept in mind: figures may be 
inflated  by  mergers  and  acquisitions  and  all  amounts  are  expressed  in  euro,  meaning  that 
exchange  rate  variations  are  changing  the  evolution  of  the  original  data  in  the  country's 
currency.  Over  the  period  2000-2008,  the  euro  constantly  appreciated  against  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. The recovery started after 2005.  

90 

http://iri.jrc.ec.europa.eu/research/scoreboard.htm  

EN 

102 

   EN 

 
                                                 
Figure 5 

25000

20000

15000

10000

5000

0

8
3
1
,
1

4
3
6
,
2

0
2
5
,
3

2
4
4
,
2
1

R&D spending in millions of euro

7
0
1
,
1

0
9
9
,
2

4
4
5
,
3

2
7
0
,
3
1

0
3
1
,
1

5
3
0
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3

9
6
3
,
3

3
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,
1
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1
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1

0
4
0
,
3

6
8
3
,
3

7
1
4
,
0
1

1
4
2
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1

3
9
1
,
3

1
2
7
,
3

7
2
6
,
9

9
3
3
,
1

9
8
9
,
2

8
0
9
,
3

4
9
1
,
9

5
3
6
,
1

0
7
0
,
4

5
8
9
,
3

1
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,
9

1
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8
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2
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9
,
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8
1
2
,
2
1

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 take 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  ICT  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 infrastructure world-wide market.  

Between 2000 and 2004, the European telecom equipment 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 and less favourable economic growth (Figure 
6). 

EN 

103 

   EN 

 
 
 
Evolution of the telecom equipment sector's  sales and R&D (Index 2000=100)

Figure 6 

110

100

90

80

70

60

50

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 sample for the telecom equipment sector 

In  the  second  half  of  the  decade,  the  European  telecom  equipment  industry  went  through 
important  restructuring.  In  2006,  Ericsson  acquired  assets  of  Marconi  telecommunications 
operations and Alcatel and Lucent entered into a definitive merger agreement. In 2007, Nokia 
Siemens  Networks  combined  Nokia’s  networks  business  and  Siemens’  carrier  related 
operations for fixed and mobile networks.  

Between  2005  and  mid-2008,  world  GDP  expanded  vigorously  offering  new  market 
opportunities in emerging and developing countries, fostering an ever increasing globalisation 
of the industry that extended its business outside the maturing telecommunications markets in 
the  advanced  economies  and  started  experiencing  new  competitive  pressure  from  Asian 
players.  

The restructuring of the telecom equipment R&D activities has been globalised together with 
other operations of this industry. Today, Alcatel Lucent R&D has approximately 23,000 R&D 
personnel  (including  Bell  Labs),  with  a  worldwide  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 countries, 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 service provider’s ability to stay competitive, create services and 
generate profitable growth. Nokia's new user interface 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 

104 

   EN 

 
 
 
The  current  economic  deterioration  is  affecting  the  telecom  equipment  industry  (Figure  7). 
The handset business saw a dramatic decline in consumer demand for handsets and a massive 
de-stocking starting in the fourth 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  expect  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  equipment  and  related  services 
market to be down between 8% and 12% at constant currency in 2009. According to Ericsson, 
investment  in  wireless  networks  largely  continues,  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  most  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 

0

-0.02

-0.04

-0.06

-0.08

-0.1

-0.12

-0.14

-0.16

Cumulative Sales and R&D, at constant exchange rate, 
of Nokia, Alcatel-Lucent, Ericsson*, Motorola, Cisco and Qualcomm

R&D

-2.6%

Sales

-13.9%

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, Alcatel-Lucent and Ericsson in fiscal year 2008. 
R&D spending is decreasing less than sales: in 1Q/09, the R&D intensity 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 

105 

   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  conducted  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 and re-focusing R&D. The seven largest operators' 
92 R&D spending reveals a significant increase in R&D between 2005 and 2008 (Figure 8).  

Evolution of the telecom operators sector's  sales and R&D (Index 2000=100)

Figure 8 

180

160

140

120

100

80

60

2000

2001

2002

2003

Sales

2004

2005

2006

2007

2008

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  significant  increase  in 
capitalised software development costs93 and by the fact that before 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. Development costs for software can be important in 
the  total  R&D  budget.  Not  all  telecom  operators  however  distinguish  between  operational 
R&D and software R&D. 

Operators are also following the same trend as equipment manufacturers 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  Telekom  Laboratories’  was 
founded  in  2005  and  its  major  fields  of  focus  include:  intuitive  usability,  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  connecting  more  than  150  universities  and  several 

92 
93 

Corresponding to 90% of total R&D spending as reported by the 2008 EU Scoreboard for this sector 
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 are 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 

106 

   EN 

 
 
                                                 
hundreds of organisations in 42 countries worldwide. France Telecom set up in 2006 Orange 
Labs, with a staff of 3,800 researchers in 18 laboratories. 

Too few telecom operators in the sample release their R&D spending in the quarterly reports 
and the impact of the crisis on their R&D during 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  industry  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 beginning of the new millennium three European 
chip companies were in the global top ten. 

The  development  of  semiconductors  relies  on  interactions  and  collaborative  relationships 
between  the  manufacturer,  the  semiconductor  equipment  and  materials  industry  and  R&D 
research centres. Although its manufacturing world 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 the competitiveness of the European industry and 
address all application fields. European public-private R&D partnerships are also considered 
the best in the world, although they would benefit 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 intensity 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 industry is structurally highly cyclical and has 
been  subject  to  significant  economic  downturns  at  various  times.  The  industry  is  also 
characterised  by  continuous  technological  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.  The  sector  however  recovered  quickly.  During  the  last  years, 
R&D amounts remained relatively stable, and there was no dramatic decline in 2008 despite a 
significant decline of its revenues (Figure 9).  

EN 

107 

   EN 

 
Evolution of the semiconductor industry's  sales and R&D (Index 2000=100)

Figure 9 

120

110

100

90

80

70

60

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 crisis extended to the real economy in the fourth 
quarter  on  2008,  the  semiconductor  market  collapsed  in  a  way  never  experienced  before  as 
reflected by the negative results in Q1 2009 reports (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  (Figure  11).  Hopefully,  as  for  mobile  handsets,  a 
turn in the inventory cycle seems to be in view, although the level of demand is still uncertain. 

Figure 10 

0

-0.05

-0.1

-0.15

-0.2

-0.25

-0.3

-0.35

Cumulative Sales and R&D, at constant exchange rate, 
of NXP, STM, Infineon, Intel, AMD and Texas Instruments

Sales

R&D

-13.8%

-30.6%

Source: First Quarter 2009 Financial Reports 

EN 

108 

   EN 

 
 
 
Figure 11: Utilisation rate of semiconductor manufacturing facilities (%) 

Utilisation rate of semiconductor manufacturing facilities (%)

100

95

90

85

80

75

70

65

60

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 software industry defined as an activity producing a software original 
that is reproduced and sold, some are packaged, some are customised and some are linked to 
complementary  services.  Inevitably, 
including  games, 
manufacturing  tools  (computer  aided  design  and  manufacturing),  business  and  internet 
software. 94 

is  heteroclite, 

the  grouping 

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 fragmentation contrasts with the fact that 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 software sector is growing at a faster 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) 

Software 

EU 

14.7 

Non-EU 

12.6 

EU 

14.0 

Non-EU 

12.1 

EU 

15.0 

Non-EU 

14.5 

* Compound Annual Growth Rate 
Source: EU Industrial Investment Scoreboard 

94 

95 

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  manufacturing  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) 
IDC figures 

EN 

109 

   EN 

 
 
 
 
 
                                                 
According  to  the  Scoreboard,  total  R&D  expenditure  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). Growth of their combined R&D expenditure over 
the period 2004-2007 is significant (Figure 12).  

Figure 12 

3,000

2,500

2,000

1,500

1,000

500

0

The software industry's R&D spending (millions of euro)

217

1,671

232

1,842

323

2,119

430

2,351

2004

2005

2006

2007

Business Software

Entertainment software

Source: Scoreboard 2008 

Although total R&D spending is lower for the entertainment companies, their R&D intensity 
is  generally  higher:  with  33.6%,  it  largely  exceeds  the  14.1%  for  business  software 
companies. The gaming industry is typically characterised 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  identify  any  single  major  EU  firm  providing 
Internet  related  utilities  (email,  search  engines,  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 performance over the relevant period.  

EN 

110 

   EN 

 
 
R&D expenditure by the two major Internet companies (millions $)

Figure 13 

3000

2500

2000

1500

1000

500

0

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 preliminary 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 strategies based on broad 
innovation  strategies  would  help  foster  long-term  growth.  The  EU  stimulus  packages  do 
recognise  the  importance  of  ICT  R&D  and  innovation  for  the  competitiveness  of  the  whole 
economy and for its ability to address the key societal challenges ahead. 

The European Economic Recovery Plan proposed by the Commission on 26 November 2008 
includes public-private partnerships for research and development in three initiatives aimed to 
develop  new  technologies  for  the  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 challenges such as increasingly global 
networked operations,  more  agile  manufacturing 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  monitoring  and  control  of  energy  consumption, 
advanced lighting systems, and smarter and optimised interconnections with the power grids. 

- In the 'Green Cars' initiative, ICT is essential for developing fully electrical vehicles, e.g. for 
battery management and power supply, for control 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 development that Europe will be able to make 
the best of the technology throughout its economy.  

EN 

111 

   EN