THE EMERGING DIGITAL ECONOMY -
US GOVERNMENT RELEASES MILESTONE STUDY ON THE
'DIGITAL REVOLUTION'
As widely reported recently in the national press, the United States
Department of Commerce has released a key technology and economic
assessment study on the future of the 'Digital Economy'.
While the study accepts that the full economic impact of information
technology cannot yet be precisely evaluated, its impact is significant.
IT industries are growing at more than double that of the overall (US)
economy - a trend that is likely to continue. Investments in IT now
represent over 45% of all business equipment investment and in the case
of some industries - communications, insurance, finance and investment
brokerages, IT now constitutes over 75% of all equipment investment.
The authors compare the rate of change of IT and its effect upon world
economies with that of previous technologies.
Because it required a network to contain and transmit its power,
electricity's potential had to wait until 50 years after it was first
harnessed before the first power station was built. It took another 50
years before electricity powered 80 percent of factories and households
across the country.
The digital revolution is happening much more quickly. The harnessing of
light for nearly instantaneous communications and the ability to use
microscopic circuits to process and store huge amounts of information
are enabling this current economic transformation.
In 1946, the world's first programmable computer, the Electronic
Numerical Integrator and Computer (ENIAC), stood 10 feet tall, stretched
150 feet wide, cost millions of dollars, and could execute up to 5,000
operations per second. Twenty-five years later, in 1971, Intel packed
12 times ENIAC's processing power into a 12mm2 chip with a $200 price
tag. Today's personal computers (PCs) with Pentium processors perform
in excess of 400 million instructions per second (MIPS). At the current
pace of development, by 2012, PCs will be able to handle 100,000 million
instructions per second.
As late as 1980, phone conversations only travelled over copper wires
which carried less than one page of information per second. Today, a
strand of optical fibre as thin as a human hair can transmit in a single
second the equivalent of over 90,000 volumes of an encyclopaedia. By
2002, a constellation of several hundred satellites orbiting hundreds of
miles above the earth is expected to bring high-bandwidth communications
to businesses, schools and individuals everywhere on the planet.
A global digital network using new packet switching technology combines
the power of these remarkable innovations in computing and
communication. The Internet ties together the computing power on desks,
in factories and in offices around the world through a high-speed
communications infrastructure. More than 100 million people around the
world, most of whom had never heard of the Internet four years ago, now
use it to do research, send e-mail to friends, make requests for bids to
suppliers, and shop for cars or books.
The Internet's pace of adoption eclipses all other technologies that
preceded it. Radio was in existence 38 years before 50 million people
tuned in; TV took 13 years to reach that benchmark. Sixteen years after
the first PC kit came out, 50 million people were using one. Once it
was opened to the general public, the Internet crossed that line in just
four years.
The report concludes that the Digital Revolution is just beginning.
Growth could accelerate in the coming years not only in the IT sector
itself, but across all sectors of the economy as the number of people
connected to the Internet multiplies and as its commercial use grows.
The growth will be driven by four types of economic activity:
* Building out the Internet: In 1994, three million people, most of
them in the United States, used the Internet. In 1998, 100 million
people around the world use the Internet. Some experts believe that one
billion people may be connected to the Internet by 2005. This expansion
is driving dramatic increases in computer, software, services and
communications investments.
* Electronic commerce among businesses: Business began using the
Internet for commercial transactions with their business partners about
two years ago. Early users already report significant productivity
improvements from using electronic networks to create, buy, distribute,
sell, and service products and services. By 2002, the Internet may be
used for more than $300 billion worth of commerce between businesses.
* Digital delivery of goods and services: Software programs,
newspapers, and music CDs no longer need to be packaged and delivered to
stores, homes or news kiosks. They can be delivered electronically over
the Internet. Airline tickets and securities transactions over the
Internet already occur in large numbers. Other industries such as
consulting services, entertainment, banking and insurance, education and
health care face some hurdles but are also beginning to use the Internet
to change the way they do business. Over time, the sale and
transmission of goods and services electronically is likely to be the
largest and most visible driver of the new digital economy.
* Retail sale of tangible goods: The Internet can also be used to order
tangible goods and services that are produced, stored and physically
delivered. Though Internet sales are less than 1 percent of total
retail sales today, sales of certain products such as computers,
software, cars, books and flowers are rapidly growing.
Introducing the study, William M. Dale, US Secretary of Commerce, states
that "This report provides us with a clearer understanding of what that
promise (the Digital Revolution) is - a future with more opportunity and
prosperity. It establishes a clear link among electronic commerce and
information technology and our economic future. The report also
provides us with a snapshot of the many innovative ways that businesses
of all sizes and from all sectors of the economy are using these
technologies to extract greater efficiencies and create new
opportunities."
Copies of this authoritative assessment of the economic impact of IT and
related technologies, especially the growth and use of the Internet in
the years ahead, are available from Official Distributor, Microinfo Ltd,
at the address below.
The document may be ordered in two versions; the main body of the report
alone or the report with copies of appendices containing supporting and
reference information.
For information about availability, please contact:
MICROINFO LTD, PO Box 3, Omega Park, Alton, Hampshire, GU34 2PG, UK
Tel: 01420 86848
Fax: 01420 89889
E-mail: [log in to unmask]
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