Every day we witness how the Internet is enabling business growth, innovation, creativity, exchange of knowledge, and economic development throughout the world. It has facilitated development of a new array of products and services that enable their electronic delivery via the world-wide web. Internet-enabled commerce has created promising new business opportunities and jobs creation in the ICT sector.
Some industry experts, indeed, have described the Internet as an important new trade route for the 21st Century, which, in turn, has fostered global economic integration. The Internet is an end-to-end network which has been tremendously successful because of the seamless nature of traffic exchange and enabling new patterns of trade. This means that many companies across a broad spectrum of technological capability now have a stake in ensuring that the trade route created by the Internet is not unduly restricted; the fruits of Internet-enabled economic growth and prosperity are best realized when markets for electronically delivered products and services, whether as a provider or user (or both), remain open and access to the platform, itself, unimpeded by trade and regulatory barriers.
Traditional models of trade relied on a vender importing goods from a foreign supplier and selling them locally. Today, many online merchants, on a platform such as eBay, rely on direct sales to foreign customers for more than 20% of their turnover. “Localization” of Internet infrastructure and services, can act to facilitate or hinder the ability for such suppliers to sell to global markets. The localization of Internet exchange points or hosting local content locally can, for example, make producers more competitive and facilitate trade.
On the other hand, some policies and practices act as barriers to trade. In recent years, we have witnessed an increase globally in the number of governments requiring foreign companies that produce digital content and services to localize investments, production, services, procurements or other activities as a condition for doing business in that country. We have seen the creation of artificial “international gateways” or in the termination of traffic through the creation of gatekeepers that extract rents based on regulated monopoly power. We have also seen the potentially deleterious effects of Internet traffic charging arrangements based on the principle of sending-party-networks pays (SPNP) that are being discussed in relation to the need to invest in upgrading local telecom networks to meet the demands of increasing traffic volumes. As a result of this practice, we could see more content going behind paywalls and certain regions, especially those with limited purchasing power, potentially being excluded from some content.
Such localization requirements often are aimed at protecting and nurturing a nascent ICT sector. In reality, though, they can work at cross-purposes with this goal by inhibiting precisely the kind of foreign investment and competition that would help spur growth and innovation in indigenous industry as well as stimulate digital trade, and encourage responsible Internet governance practices. These types of local requirements hinder the abilities of small producers, including and perhaps especially in developing countries, to reach foreign markets.
A key question in respect to Internet governance, therefore, is the need to identify policies and practices that either open opportunities for economic and social development through trade or act as barriers to their fruition. The panel will discuss these trends and their implications for Internet governance, trade and economic development.
This panel will draw on the OECD’s important analysis on the “data-driven economy” to explore policies that have proved successful in encouraging investment in the Internet, the ICT sector, and ICT-enabled industries. Speakers also will consider how the OECD’s ground-breaking Internet Policy Principles have served as a model for Internet governance practices for developed and developing countries alike, which has fostered more robust participation in, and benefits from, the digital economy. Further, they will examine how localization and other national requirements, in contrast, undermine the potential of global investment, information flows, and sound Internet governance to create local economic and societal benefits.