Presentation on BCG Report and E Friction 00:00 David Dean: Mr. Johnson in Nigeria saw that Nigeria was bottom of the list. She said then, this is encouragement to her to work harder not to move up the list should ICANN decide to publish this again at some point in future. So, the fact that there are several African countries down at the bottom there should be seen, I think, as an encouragement there's certainly a lot of potential to move up. And what we have, and what ICANN can make available to you, for each of those countries that's on the list is a sort of a scorecard which looks at each of those metrics individually and compares them with similar countries. That's something which you might want to take a look at, at some point. 00:47 David Dean: So we started, having created this index, started doing some analysis on the back of it and I'd like to take you through some of that analysis here. First of all, as one might expect and as internet penetration increases, moving to the right on this chart, then e-Friction goes down. That is maybe a little simplistic, and so, we wanted to look at something which was a little bit more valuable, especially when we're looking at the economic impact. And we came to the conclusion that if you are able to move your country from the bottom quintile, the fifth quintile, up to the top quintile which is essentially where those two red lines are on the chart... I think I have a pointer here that I can... If you... Whoops. How do I get rid of this? [background conversation] 01:50 David Dean: Maybe I'll abandon the pointer. If you move from the bottom quintile to the top quintile on this chart then essentially you're adding two and a half percentage points to your GDP which is a very significant amount as you can imagine. And given what I was saying before about the indirect impacts of the internet, the grow code, the consumer surplus, the impact on consumer purchases and much more, really that economic impact is much more than the two and a half percent points that we have here. So if there's so much at stake, the question's obviously how can e-Friction be reduced? Which leads to the next part of the presentation which looks at which wheels can be greased to make the internet a more, even more significant contributor to the countries' economies. 02:44 David Dean: The first two things I'd like to look at are the question of wealth and the question of how rural a country is. So starting with the wealth question, if you just plot those 65 countries against their GDP per capita you get a scatter plot like this. And I've very consciously not put country names on this particular chart. And you can see the first takeaway that you probably get from that is that as countries become richer, their e-Friction score seems to be lower. That's maybe not entirely unreasonable, but I think the more important insight from this chart is the following: If you look at a particular level of GDP, let's take $10,000 per capita. So in the middle of the chart you'll see that there are some countries there that are at around $10,000 for GDP that have an e-Friction score of about 40 and a consequently sort of second quintile, perhaps third quintile. But their are also countries at $10,000 per capita with e-Friction's close to 80, so down in the fifth quantile of our index. 03:58 David Dean: So at one particular level of income there's really quite a wide range of e-Friction scores. And you see that also at the... For the countries at the right of the chart, the high income countries, you see that there are some countries with high levels of income with scores of less than 20, but you also see countries with scores of maybe 50 or 60 or so, a very wide range of e-Friction scores. And so, wealth on its own is not the driver of destiny when it comes to e-Friction. So what other things are important? What we've done here is, first of all, put on the country names. This is the same chart as before but this time with the names. And we've identified these different clusters of country where it seems that they are... Have many things in common, that they're behaving in very similar ways. 04:55 David Dean: So if you take, for example, the top right hand part of the chart, what we call here the "all rounders," that's a set of countries which are all quite wealthy, but they all essentially perform well on all of the dimensions of e-Friction that I introduced to you earlier. And then moving sort of south-westwards across the chart, you see these high income overachievers and the middle income overachievers. Those are countries with lower levels of income than the first category they're all rounders, but where also they are performing more strongly than with it on the e-Friction index than one would expect from their levels of GDP. 05:35 David Dean: Looking down to the bottom left of the chart, we have two segments that I'd like to talk about. First of all, we have these, the middle income rural countries and then the developing rural countries. Because as we looked into the analysis more closely we came to the conclusion that wealth has some role, but also the extent to which a country is urban or rural, plays a big role as well. 06:04 David Dean: And the little red arrows point to the African countries that we have on the index, and most of them as you will undoubtedly recognize, are quite strong rurally focused, which implies obviously a big challenge in terms of rolling out infrastructure and getting consumers access to the internet. And here I'd just like to step in a slightly different direction. The Boston Consulting Group as a part of a separate piece of work, which we've been doing with the World Economic Forum, has been looking at how to encourage investments in infrastructure particularly in developing countries. 06:49 David Dean: I don't want to go into a great deal of it here, but it's relevant particularly for the developing rural countries. And I'd just like to make two points. First of all, there are many new technologies out there, be it balloons or drones or whatever, which could enable access particularly to those rural regions, and one of the messages from the report from the World Economic Forum was the policy makers should do all that they can to encourage such new technologies. 07:18 David Dean: And secondly, and maybe more closer in, is to look at the question of spectrum and how it is allocated. This I think is not in the documents that you have, but for a wide range of countries across the world we examined the amount of mobile spectrum that's available for 2G, 3G, or 4G services, and we came to the conclusion that, first of all, there's a significant lack of harmonization, there is a significant potential for re-farming, and where spectrum has already been allocated, it could in many cases be much more effectively deployed than it is. And the specific message depends on the country that you're looking at, but the message from this report to policy makers was to really put a big emphasis on the availability of spectrum as one way of improving access to the internet in those countries. 08:25 David Dean: So, moving back to the ICANN work. So we've talked about the rural aspect, we've talked about the wealth aspect, but there are other aspects which need to be addressed as well if the internet economy is going to function well, and the next two things that I'd like to talk about are essentially literacy and ICT skills. As we looked again at the data for e-Friction, one of the things we wanted to examine was how it is linked to literacy rates. What you see here on the vertical axis again is the Friction score, and on the horizontal axis you have, it's a log scale, but it's the amount of illiteracy in a particular country. 09:13 David Dean: So highly literate countries are on the left, less literate countries are on the right. And you see that there is... Maybe it's not a perfect correlation, but there is certainly a trend that those countries with high literacy rates perform much more strongly for all the sorts of reasons that you can imagine when it comes to e-Friction. And given that over 98% of illiterate people around the world can be found in those economies with high or very high levels of e-Friction, and that over 800 million of them or so are in rural areas, there's a strong argument here, I guess to policy makers, to focus on reducing literacy as one way of encouraging people to participate in digital economy. 10:06 David Dean: Next question that we looked at was the question of language. And you sometimes hear that you need to speak English to be able to use the internet, but as we know in many parts of the world English is just one of many hundreds of languages that are being used. And what we show here is the Friction score again against a measure of English proficiency. And only countries listed here where English is not the main language. And again you see a bit of a correlation, it's not perfect again, but those countries where English is better spoken have lower e-Friction scores than those that are don't. 10:53 David Dean: I think however there are two messages that can be taken away from this chart. One message would be to say people need to learn to speak English. That's probably the simplistic view. I think the second and more important message, second possible intervention for policy makers, is really to focus on creating much more local language content, which is more accessible to people who speak those hundreds of languages in many countries. I'm certain that's true across Africa. And that I think is going to be a faster way to getting use of the internet than forcing people to speak English. Also because creating local content is going to help create jobs for people who will be creating that content. 11:49 David Dean: So, let me just summarize what I've said so far, and then we'll move on to the small and medium sized companies. So one message is that a high share of the global population is in countries with a very high level of e-Friction, so addressing the questions of e-Friction will bring really a very significant portion of that off-line population into the digital world. 12:15 David Dean: Secondly, the economic impact of those top quintile countries is really very significant 2.5 percentage points higher than those in the bottom quintile and that's a conservative estimate, I think. Thirdly, if you looked at the chart that you have in the handouts, you'll see that some countries get it right on all components of e-Friction. They score well on all dimensions whereas most countries have a [12:38] ____ better performance, and I think the message from that is that there's no silver bullet for capturing the Internet's impact. Policy makers, governments, really need to work on many different levers simultaneously in order to benefit from the internet economy in total. 12:58 David Dean: So, I mentioned small and medium-size enterprises and said that in many countries around the world, probably most countries around the world, small and medium-size enterprises account for a very very high proportion of the workforce and a significant proportion of GDP. In some countries, it might be 50% of GDP or 80% or 90% of the workforce, and policy makers have a strong interest in ensuring that these small and medium-sized companies survive and thrive. 13:32 David Dean: Here, we have just a couple of quotes, a couple of examples taken from the report that you'll find on BCG'S or ICANN's website from SMEs which really owe their existence and success to ways in which they're using the Internet. Over the past few years, BCG has done as significant amount of work across the world, looking at how the Internet has helped small and medium-sized companies grow their revenues and this is just an extract of some of that data for about a dozen countries, including obviously a couple of African countries here, showing the difference in growth rates, and this is measured over a three-year period, between those companies which are extensively using the Internet, those are the ones in green, and those that are using the internet to a much less significant extent. 14:26 David Dean: So using the internet extensively, could be using social media or it could be using platforms in the cloud for a collaboration. It could be a smart use of search engine optimization, many other different forms of internet use as well which we categorized. And I think you will agree, I hope you will agree, that irrespective of which country you look at, those companies which are extensively using the internet are growing quite a bit more significantly than those that are not. And in addition to that, you will see, and that's my next chart I think, you will see that again, here you got the green and orange curves corresponding to the curves before, that those companies which are using the internet more are selling also more broadly. They're not just selling within their neighborhood or within their city or within their local region, they're also selling much more across the whole country or indeed exporting much more significantly than those companies that are not using the internet as much. 15:34 David Dean: So the internet is helping small and medium-size enterprises to extend their geographic reach and that is true on the sales side as just described as the left-hand side of this chart. But if you'll also ask those companies where they are buying their goods from for their supply chain, you will also discover that they're also purchasing much more globally than those that are using the internet less. So essentially, the internet, as one might expect, is helping these companies to become much more integrated components of the internet economy. And they're generating growth and they're generating jobs with it. So a strong message to the policy makers here is to get more SMEs online. So, what do SMEs complain about, what would SMEs like to address in order to reduce e-Friction and this is the result of the global studies. We have this on a country basis as well, but this is the global results. What you see here is for the four pillars of e-Friction which are listed on the left-hand side. 16:42 David Dean: We asked various questions to these SMEs as to how they saw the need to reduce e-Friction, and you'll see that some areas are seen as particularly problematic and others are less, red being the more problematic area. One message from this is that if you look at the top of the chart, which is where we have Friction which is related to infrastructure, then in general, I think it's fair to say that SMEs do not see significant problems there. The length of the red bar is relatively short compared to most of the other questions that we asked. 17:24 S1: So infrastructure is important, of course, but it really only plays a less major role when it comes to how SMEs think about the internet. They see... The SMEs see much more significant problems in the other areas such as regulation to support online sales, regulation to support cross-border sales, questions moving down the list of safety and security and personal data online, questions of getting the right skills. 18:01 David Dean: All the questions which are obviously related to their success as a business, but are not related really in any way to the extent to which there is infrastructure available in the country that these companies are operating in. So many, many sources of Friction can be addressed here by policy makers, by governments, which have got nothing to do with the infrastructure that's out there. 18:31 David Dean: So, coming to the sort of concluding messages, as I said for each of the 65 countries that we looked at, we have this little metric that we've got here in the middle, so all 55 indicators are shown here for those countries and obviously from that you can start developing agendas on what needs to be changed. I think one of the key messages, or there are two key messages from this. 18:57 David Dean: First of all, there are many counties around the world where the metrics are not available. There's an old saying, "What gets measured, gets done." So if you could not show where you are starting from, maybe the best thing to do is start getting some data on those metrics to understand how e-Friction is in your particular country. And secondly, the message from this is that given the wide range of sources of Friction, it's not going to be one action or two actions, it's gonna be a whole set of different actions involving many different stakeholders that is going to be needed in order to reduce the level of e-Friction and that multi stakeholder approach which is obviously very much at the heart of what the internet is about, is really going to be key in making the changes necessary to grow the internet economy. 19:51 David Dean: And the price is actually quite significant, just doing some simple maths. If Africa is a continent, what to achieve an internet economy that the level of 5% of GDP which roughly where the G20 would be next year about that's around $100 billion to the continent's economy would many indirect benefits as well. Getting the next 500 million people online in Africa, will create something of the order $200 billion of consumer surplus based on the analysis that I introduced earlier on. Maybe around 20 million jobs of each percentage point increase in the size of the internet economy, so very significant job creation potential and then social benefits and trade, as well as important benefits from a growing internet economy. So if I put together a broad agenda for policy makers based on this work, obviously there are many points that need to be addressed, but I think these six messages would be the key ones. 21:00 David Dean: First of all, do not see your country's wealth as its destiny as I showed GDP as one indicator of e-Friction, but there are many others, many other drivers as well. And irrespective of how... Of what your level of GDP is, there are many levers to address, to reduce e-Friction. Secondly, infrastructure obviously does play a role, it's 50% of the weight of the e-Friction index. And achieving affordable infrastructure in low population density areas in particular, requires new technologies, new business models, experimentation and policy rather than just blindly following what is being done elsewhere. 21:44 David Dean: Thirdly, literacy, basic literacy, English language skills, ICT skills, all help, but also just taking that language point, local relevance, local language content, local content, drives usage as well, there are many, many examples of that. It requires encouragement of local eco-systems, e-government services, e-health services, education, and so on and so forth. That local relevance, is going to be increasingly important I believe as we push the Internet even further. 22:13 David Dean: Fifthly, getting companies online, small and medium-sized enterprises as I've said, grow faster if they're using internet more. There's a more strong message there, business creation and job creation. And last not least, encourage what I called hear joined up policy making. Driving from multi stakeholder involvement from across the whole ecosystem, but also learning some relevant peers. 22:38 David Dean: Not necessarily peers from with your neighbours, but peers from other countries further afield might be the right ones to consider as you're looking to define your own agendas for the internet economy. So the price is high, price is big, and I encourage you all to examine the report. I have a slide here that's the original report which came out a year ago and then an update which came out in April this year, you can find these on the BCG or the ICANN websites. And I'll leave that chart up as I stop and pause for questions. [applause] [background conversation] 23:33 Vymala Thuron: Just do some introduction. So, before any question there will be Pierre, giving some brief, and then we'll take the questions. 23:50 Pierre Dandjinou: Thank you very much Dean, for this remarkable final report, and again, good morning to everyone. Of course we are just going to get your feedback on these reports, and let me quickly present a kind of background to this report that ICANN commissioned in 2013. And the idea was to actually better understand how various factors inhibit online interaction and exchanges, and thereby constrain the economic activity. 24:34 Pierre Dandjinou: And the result is this report that we are having here. So, briefly there is something I just also wanted to highlight which is, the World Economic Forum started yesterday in Cape Town, and of course the theme here is the re-imagining African's future. And you also see that digital economy is forming a kind of pillar of this imagination Africa's future. I think it's quite important. And we also have to find the BCG report for coming up of this notion of e-Friction, and also which rarely laid the basis for what we might call kind of strategic policies for countries. 25:26 Pierre Dandjinou: And as Dean point it out, when we... Actually the report was presented in Nigeria in Abuja, yeah, the minister has a very good reaction. Was saying, well, maybe this report, whatever he's saying here is not exactly what Nigeria looks like, and thereby she wanted to commission her own study for her country. Later on at Transform Africa in Rwanda, we also did this sort of presentation of the report and most of the ministers there and the Head of State were saying, "Well, that's quite interesting, but how come our country is not represented there? Or how come we don't have our own figures?" Of course that shows that there is something to do about in the data collection in other countries and certainly this is something, this is one of the lesson to be done from Africa. 26:20 Pierre Dandjinou: I don't want to just keep on talking because now is your time for your feedback question and answers. We do have different people, different countries here. Let's have a clear cut idea on what you really think about this report. I hope you were able to get a few copies outside there, but we also have links to this report so that you can study this and then you be in touch with ICANN also with the BCG team as well. So, we like to take the opportunity to provide any feedback, that will be wonderful. We also have our board members here from ICANN and they decided that we should launch this. Mike is around here, if Mike have maybe one minute or whatever a feedback on this, that will be fine. And then we open up to your discussions, thank you. [pause] 27:30 Mike Silber: Thanks Pierre. I hope everybody else is as fascinated by this initiative as I am. And I would really encourage you, even those of you who don't generally read consulting house papers, to actually take the time to look at this one because it's a very different picture of the internet in Africa compared to what we're used to from some of the other guys. In particular, it celebrates the successors and it really acknowledges the successors but it hones in very clearly on where the challenges are. And I've had the opportunity of engaging with local politicians on this issue. And they were very pleased to see a formal honest and quite a positive approach to the future of the internet in Africa. And also identifying those areas where work is needed 'cause I think we all acknowledge that work is needed. And that's the responsibility of all of us. Government, private, academic, technical communities, all have a role to play in actually moving that forward. [pause] 28:53 Vymala Thuron: We'll take the three question from the floor and then of course if you have any more question, I will invite you to meet with Pierre, with Mike Silber, with Dean, with David Dean during the coffee break because we have our AGMM after, there is the CRISP Team debrief. So I'll take a few questions. Please state your name and the question, to whom you're asking the question. Thank you. 29:27 Benoit Morel: I'll take the first question then, which is in fact three short questions, it may not be apparently targeted completely to Africa, but nevertheless are relevant to. What is the definition of ROPO? ROPO is the second "O" is for offline, so when they buy something at Amazon Prime for example, or Alibaba or something like that, is it part of a ROPO or not? But that's technicality. The question more is ____ look at you up in, in fact in your chart a positive economic impact of low e-Friction and compare different countries in Europe, and on the left-hand side, the left axis shows the ____... Digital economy as a percentage of GDP, and it puts United Kingdom close to 8%, whereas you have the rest of Europe more around 5% or less. 30:14 Benoit Morel: And I was wondering whether you can see in the dynamic of the economy, evidence of this effects which you could have refined it a little bit and added this a little bit. And third, something to do with the rural area. You may know some countries like Kenya have introduced system of payment like M-Pesa and so on, which will change the financial structure in those places and do you have any reason based on the analysis to see that it will have a mega impact on their economy? [background conversation] 30:58 David Dean: Okay, thanks for your questions. Very briefly on ROPO, on your question of Amazon, that would not be part of ROPO because normally with Amazon you would also do the payment transaction online with your credit card, with PayPal or something similar. But if you were to go to a website and just, may be that's Amazon as well, just to compare prices and then you would go to a store and physically buy the product there then that would be, that would be a ROPO transaction. 31:33 David Dean: Secondly on Europe, you're right to point out that there are very big differences across the continent and that's also being supported by other work that's been done. There are some economies most notably the Scandinavian, the Nordic economies, Estonia, Britain, that have much more highly developed e-commerce industries than countries particularly in the South and the East of Europe. 32:10 David Dean: E-government for example is very strong in Denmark or in Estonia, but in many Southern European countries it's less so and that accounts with that very big difference in EGDP across the continent. And your M-Pesa point, we didn't look specifically at the economic impact of that, but I think M-Pesa is a fantastic example of something where a country has taken an approach which essentially leapfrogs existing systems, existing industry structures. And I think I made the point that as Africa looks to develop it's infrastructure, develop it's business systems in order to reap benefits from the internet, you shouldn't be looking at policies which have worked elsewhere, you should be working on policies which work in the countries that you're in. M-Pesa is an example of essentially breaking the mold of a business system with significant consumer and industry benefits. 33:19 David Dean: Thank you very much. Sometimes when we read reports, we don't quite get it but when we hear a presentation it reinforces it, so from that point of view, I really appreciate the outreach you've done to us. Something struck me and I wanna ask a question around it, which is the e-Friction and spectrum. Now, my question here is have you had opportunity to study because of the community we are in, to study e-Friction and number resources or e-Friction and names because perhaps they may have similar characteristics. Maybe finiteness is an issue, maybe it's not. So I was just wondering the same way that you studied the spectrum, have you had chance to look at the resources that enable the internet and the state of them, and it's impact on e-Friction? Thank you. 34:27 David Dean: Thanks for your kind comments on the report. We started with a very long list of potential sources of e-Friction, I think it was probably 100 or so. And included all sorts of things related to... Or including related to domain names and many other factors as well. And the final list was the 55 that we showed here and that's not because there are other sources of Friction which are not important, but we were trying to get a good balance between having a relatively large number of metrics, but also metrics which were available on a reliable basis across many countries across the world. 35:13 David Dean: We could have made the choice of including more metrics, but then we would have had fewer countries or we could have had fewer metrics and had more countries and this was sort of the compromise that we set. And we also very clearly said with... Together with ICANN when we began this work that this report is not supposed to be the definitive report on internet friction, there is probably no such thing, because as things evolve, new sources of friction will emerge as other forms of friction are removed. And so, this is a hopefully a contribution to the debate about e-Friction and how we can get more people online around the world, but it's certainly not the definitive answer. 36:00 David Dean: It would be interesting at some point to go back and look at additional sources of Friction and how that affects the internet economy. 36:11 Vymala Thuron: Thank you, David. Unfortunately I will have to close this panel and I will invite you to have a chat with all these panellists during the coffee break. To continue, I would like to call the CRISP Team to give the update and to come on stage so that we can we keep with the agenda, thank you. Thank you very much, big applause. [applause]