The Hindu Business Line : Diffusion in use of ICT

Continuing with the assessment of the global diffusion in the supply of ICT goods and services in the previous edition of Macroscan (Business Line, October 17), C. P. Chandrasekhar and Jayati Ghosh examine the diffusion in use of the technology. This defines the size and structure of a global market for an IT industry still dominated by US firms.

THE NUMBER of Internet users has risen as much in developing countries as in the developed. — K. R. Deepak

If information and communication technologies are ubiquitous in the world today it is because of the widespread diffusion in use of the technology. There are two aspects to such diffusion in use. First, the use of ICT in the agricultural, non-ICT manufacturing and services sectors, which can transform the nature of production in these sectors with major implications in terms of labour productivity, growth and employment. Second, the penetration of ICT into activities outside of production, which can reshape the way work, markets and leisure is organised and the way in which individuals and communities trade and access information and services, leading to changes in the structure of markets, improvements in the quality of life, a deepening of democracy and major advances in terms of human development indicators.

ICT growth and economy-wide productivity

Experience from developed industrial countries suggests that the growth of the ICT sector in terms of output and employment need not necessarily be accompanied by any equivalent diffusion of information technology into other sectors, especially manufacturing. As a result, the existence of a large information technology sector need not imply that production processes elsewhere have been transformed resulting in substantial productivity gains.

This "productivity paradox" was put on the agenda by the 1987 remark of Nobel laureate Robert Solow: "You can see the computer age everywhere but in the productivity statistics." Summarising the evidence of the "productivity paradox", analyst Paul David (2000) noted that productivity growth estimates pointed in two directions. First, "the productivity growth rate's deviation below the trend that had prevailed during the 1950-72 "golden age" of post-World War II growth became even more pronounced during the late 1980s and early 1990s, instead of becoming less marked as the oil shock and inflationary disturbances of the 1970s and the recession of the early 1980s passed into history." That is, when IT supply was expanding, productivity was not growing any faster. Second, the productivity growth rate estimate of the US Bureau of Labour Statistics for 1988-1996 sank to 0.11 per cent per annum, which represented a further drop of 0.24 percentage points below the pace of productivity that had been achieved during the post-World War II golden age.

ICT-related infrastructure development is accelerating in the middle- and low-income countries. - S. Siva Saravanan

Thus, while the much more recent revival in productivity growth has reduced scepticism regarding the ability of ICT innovation to raise economy-wide productivity, the least which can be said is that the lack of correspondence between high rates of innovation and slow growth of productivity suggests that the process of horizontal diffusion into non-ICT sectors is time-consuming, gradual and can even be painful from an output and employment growth perspective.

While the horizontal diffusion of the technology into use in production in non-ICT sectors has been slow, elsewhere the diffusion of ICT use has been much more rapid and widespread, even if uneven. The world has witnessed a rapid process of diffusion in use of information and communication technologies since the mid-1990s.

The pervasiveness and growth of ICT use is seen in the number of personal computers owned by people. The Computer Industry Almanac estimates the number of PCs in use at the end of 2005 at round 900 million. Countries such as China, South Korea, Brazil, India and Mexico feature among the Top 15 countries in terms of number of PCs-in-use (Table 1).

In 1990, there were 24.9 personal computers per 1,000 people across the world (Table 2) and this number more than tripled to reach 79.71 computers per 1,000 people in 2000 and then climbed to 129.82 in 2004. What is noteworthy is that even though high-income economies have a much higher level of PC penetration, economies in almost all income groups have registered significant increases.

ICT related infrastructure development, which is nearing saturation levels in high-income countries, is also accelerating in the middle- and low-income countries. In 1990, there were 99 fixed lines per 1000 people. A decade later in 2000, the figure had reached 161 per 1,000 people. By 2004 the number was 191 (Table 3). Much of this growth has occurred in the middle- and low-income countries.

The telecommunication landscape also began to change from one dominated by landlines to one based on wireless technology. Although wireless communication is still considered a recent innovation in the evolution of telecommunications, adoption rates in developed and developing countries have been astounding. Analysts of diffusion processes and their determinants have correctly argued that wireless communication will experience exponential growth to surpass landline diffusion, due to faster deployment, lower costs and greater ease of use. On a global scale, the penetration rate for mobile telephones rose from 16 per 1000 people in 1995 to 122 in 2000 and 279 in 2004 (Table 4), by which time it had gone way ahead of fixed line penetration.

Despite this, the presence of mobile telephones makes aggregate tele-density an unsatisfactory measure of the extent of diffusion. A very large proportion of cellular phone subscribers are those who subscribe to the service in addition to holding a regular landline, so as to benefit from the mobility that cellular telephony allows. Hence, the rise in telephone density as a result of an increase in cellular telephone connections may not be fully indicative of the diffusion of telecommunications technology among those who were thus far marginalised from the network.

Growth of the Internet

But diffusion rates for relatively newer ICT innovations like the Internet are also catching up. The Internet first began with ARPANET (Advance Research Projects Agency Network) in 1969, which linked US scientific and academic researchers and consisted of four host computers. In 1980, there were 213 host computers in less than 12 NATO (North Atlantic Treaty Organisation) countries. In the mid-1980s, the ARPANET took its first step out of the US Department of Defence and became the Internet. By the end of the 1980s, connectivity had spread to more than 20 countries with 100,000 host computers. The millionth host was connected in 1992 and in 2003, more than 200 countries had full TCP/IP (Transmission Control Protocol/Internet Protocol) connectivity with over 500 million users (Wolcott & Goodman 2000).

The number of Internet users per 1,000 people has risen from eight in 1995 to 65 in 2000 and 140 in 2004 (Table 5). It is here, however, that the pace of penetration has been much faster in the high income and upper middle-income countries than elsewhere in the world. But there are clear signs of catch-up even in lower middle-income countries.

Computer Industry Almanac Inc. reports that in 2005 the number of Internet users worldwide had crossed one billion, having risen from 45 million in 1995 and 420 million in 2000. Interestingly, UNDP's Human Development Report 2001 predicted that by 2005 there will be well over a billion Internet users with access to more information than ever at a rapidly decreasing cost. At that time, there were 2.5 billion unique and publicly accessible Web pages on the Internet with 7.3 million new ones being added everyday.

Though the US topped the country-list for Internet usage with 198 million users (Table 6), China with close to 120 million users was fast catching up. In fact, according to the report, much of future growth in Internet users would come from populous countries such as China, India, Brazil, Russia and Indonesia. These countries are also expected to register strong growth of wireless Web usage and for many new Net users the cell phone may be their only Internet access device.

Gap closing?

Overall, the evidence does point to a significant degree of diffusion in use of ICT across the globe, including in developing countries. Diffusion in use seems to be progressing much faster than diffusion of supply, barring a few exceptions such as India and China. This is a factor which may explain overoptimistic assessments of technology diffusion in the ICT area. What is expanding is the market for ICT in developing countries, with supply still concentrated in the developed countries or with developed country transnationals.

What is more, inter- and intra-country variations in connectivity and access lend some support to the idea that ICT diffusion could well be accompanied by widening digital divides. Those who have no or limited access to the technology or the skills and knowledge required to exploit it fall further back in terms of their ability to use the technology. The term `digital divide' denotes the resulting widening disparity in the adoption of ICT by different sections of society.

It has been argued that the rapid pace of expansion of information and communication technologies in the developing world implies that though there may differences in the level of diffusion of the technology, that gap is closing.

Thus, the popularity of the term "digital divide" is attributed more to "its alliterative potential than for its inherent terminological exactitude" (Fink and Kenny 2003) What such arguments ignore is the fact that even when diffusion occurs there are substantial gaps between sections within developing countries, so that the global digital divide persists even if the lines separating diffusion in use are not stark along national boundaries.

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