Digital Divide Narrows, According to the Economist Intelligence Unit's Seventh Annual E-Readiness Rankings

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LONDON - 26 Apr 2006:

The world in 2006 is ever more "e-ready" -- there are over 1bn Internet users and 2bn mobile-phone users worldwide, and most countries continue to make steady progress in most qualitative indicators of technology-related development. Virtually all countries included in the 2006 e-readiness rankings have improved their scores over the past year. Moreover, both in relative and absolute terms, the improvement is greater in the lower tiers of the rankings than at the top. As a result, the distance separating the best from the rest has declined. "The digital divide no longer looks quite the chasm many people once feared," says Daniel Franklin, Editorial Director of the Economist Intelligence Unit.

Another divide is also diminishing, in this case between upper tier countries in terms of broadband development. North Asian leaders had stolen a jump on other OECD countries with a rapid acceleration of broadband adoption. Over the past two years, however, broadband growth rates in the likes of South Korea and Japan have stabilised, while other e-readiness leaders such as Norway and Switzerland have made up ground. Broadband connectivity is becoming less of a distinction among e-readiness leaders, and other criteria--such as innovation, information security and governments' commitment to digital development -- have emerged as more telling differentiators.

Since 2000, the Economist Intelligence Unit has published an annual e-readiness ranking of the world's largest economies, using a model developed together with the IBM Institute for Business Value. A country's "e-readiness" is a measure of its e-business environment, a collection of factors that indicate how amenable a market is to Internet-based opportunities. As this year's results suggest, the goalposts of e-readiness are beginning to move. "Economic progress is increasingly dependent on innovations in the use of technology," says George Pohle, Global Leader, IBM Institute for Business Value. "In economies reaching ubiquitous adoption of the internet and communications technologies, future competitiveness is driven by the creation of new services that exploit the infrastructure."

Among other major conclusions of this year's rankings:
Europe remains dominant. Most of the rankings' top players have moved upwards in lock step, with little movement in the broader ranks from 2005 to 2006. West European countries take six of the top ten spots in this year's rankings, and the Nordics occupy three of them. Denmark (in 1st place), Sweden (4th) and Finland (7th) remain best in class in key areas of connectivity, such as mobile penetration and Internet use. Among the biggest gainers in 2006 are Australia (8th), Canada (9th) -- breaking into the global top ten for the first time -- Lithuania (38th) and, at the lower end of the scale, Algeria (63rd).

Multiple paths to e-readiness. Substantial investments in networks are indispensable. But even countries with big infrastructural deficits and business environment weaknesses -- such as Bulgaria (44th), India (53rd) and Vietnam (66th) -- are enhancing their e-readiness in other ways, such as through the development of IT outsourcing capabilities. Likewise, here and elsewhere in the developing world, the increasing use of open-source software is expanding business and public-sector access to information technology.

Innovation is relentless. Firms in many countries are experimenting with new, untested business models and processes, as evidenced by the threat that upstart providers of voice over IP continue to pose to telcos; telcos themselves are also mounting a challenge to cable companies and broadcasters through the launch of IP television (IPTV). Innovation continues in the public sector as well, the most noteworthy examples being in Europe, where public-private initiatives are making e-government services more accessible to citizens.

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