Internet penetration: not there yet

Morris Kaplan

Morris Kaplan is a guest blogger.

Morris Kaplan, one-time stockbroker and venture capitalist, brings his finance skills and recent experience as a business journalist and writer to IT, with a special interest in telecoms and how communications is being transformed by technology.

The report The Connected Continent: How the internet is Transforming Australia's Economy, is a document that tells more about the past than the future. The report, prepared by Deloitte Access Economics, found the internet made a direct contribution to the Australian economy of $50 billion, or 3.6 per cent of gross domestic product.

That’s informing: it tells us that the contribution is of similar value to the retail sector or Australia's iron-ore exports. Yet when reading the report one finds that small firms were more focused on winning customers nearby rather than selling to the world. Small businesses say they are using the internet as a way of more efficiently reaching customers who might well be local.

If one adopts the Thomas Freidman thesis (A Flat World) then we would expect that business would be using the internet to target customers who were outside their geographic footprint. For sure the internet acts as a communications and productivity tool: the report found the internet yielded $27 billion in productivity increases to business and government, which flowed through to lower prices and new products, and delivered benefits of about $53 billion to households.

Australia is one of the leading adaptors of new technology. Consider the rapid embrace of Smartphone’s compared with other countries. But it does (still) lack the access to cheaper, fast internet that you may find in northern Europe and the UK as well as South Korea and Japan. In Europe, some estimates put the contribution that the internet makes to GDP at more than 6 percent – far higher than in Australia (3.6 percent).

If we think about transformative behaviour, smart phones are a classic disruptive innovation. Consumers now build their lives around the Smartphone, especially when connected to the internet. By now the internet, the smart phone is integrated into our personal and working lives. It is nothing “new”. Which begs the question: why is small to medium sized business so slow to embed these technologies into their daily lives.

When considered as state of the art communications Smartphone’s, the internet offers much room to expand in Australia. The amount of activity on the internet has doubled over the past four years, yet when compared to the countries noted earlier, it’s still early days. Nor surprisingly even the traditional retailers are crossing the digital divide now racing towards a more contemporary multi-channel business model.

Tags: GDP, internet, small business, smartphones