DRIVING FORCES, UNCERTAINTIES, and FOUR SCENARIOS to 2025

DRIVING FORCES, UNCERTAINTIES, and FOUR SCENARIOS TO 2025

TABLE OF CONTENTS

Foreword ...... 1

Introduction ...... 2

Five Premises for the Future ...... 5

Axes of Uncertainty ...... 9

The Scenario Framework ...... 13

FLUID FRONTIERS ...... 15

INSECURE GROWTH ...... 19

SHORT OF THE PROMISE ...... 23

BURSTING AT THE SEAMS ...... 27

Using the Scenarios and Exploring Their Implications ...... 31

Conclusion ...... 39

Acknowledgments ...... 40

Appendix 1 ...... 41

INTERVIEWS ...... 41

Appendix 2 ...... 44

AXES OF UNCERTAINTY AND DRIVERS OF CHANGE ...... 44 FOREWORD

Th is report is a collaborative eff ort between as vendors, suppliers, service providers, device Cisco, the global leader in Internet architec- manufacturers, and application developers. ture, and Global Business Network (GBN), the Th e other is a broader group of stakeholders, world’s foremost scenario consultancy. especially policymakers who are shaping the rules of engagement that aff ect the Internet in It is off ered as a contribution to ongoing discus- order to best serve their constituents. sions and eff orts to harness the huge potential of Internet and IP networks to drive economic and Th e measure of a successful set of scenarios human development around the world. Th is is of is twofold: by getting us to imagine diff erent particular relevance to emerging-market coun- paths that the future may take, they help us to tries where the relatively low level of Internet use be better prepared for long-term contingencies; today reveals a wide opportunity gap in terms of by identifying key indicators, and amplifying economic productivity and social inclusion. signals of change, they help us ensure that our decisions along the way are fl exible enough to We hope that our discussion of key driving accommodate change. With this report, we have forces and uncertainties aff ecting the Inter- attempted to meet these objectives in ways that net’s evolution and the scenarios that we’ve are far-sighted and provocative on the one hand, developed to illustrate how these factors may and practical and action-oriented on the other. unfold by 2025 will be a useful source of We hope these scenarios will inspire broader insight for even the casual reader. But we conversations and wiser choices so that broad- had two primary audiences in mind for this band and the Internet realize their potential to report. One is business and technology lead- enhance global prosperity and well-being. ers who are actually constructing the Internet

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 1 INTRODUCTION

It’s 2025. Imagine that the Internet has under- the Internet has made since the fi rst email mes- pinned a new wave of global prosperity. It is now sages were sent over the ARPAnet in 1970, and as central to the lives and opportunities of peo- the massive changes it has triggered in how we ple in the outskirts of Mexico City and rural Sri live and work. Yet despite its explosive growth, Lanka as it is to people in Tokyo, New York, and especially in the last 15 years, the Internet is still London. Myriad new applications cater to most in its youth, maybe even its infancy: only one- of the world’s population and to businesses of all third of the world’s population has ever ”surfed” sizes and shapes. online (almost 5 billion people haven’t) and fewer than one-fi ft h of those who use the Internet do Or maybe not. so regularly.

Maybe the Internet has become a victim of its Just as the architects of the ARPAnet never own success, with the explosion of Internet antici pated the Internet of today, it’s equally products and services now a source of frustra- hard for us to predict the Internet’s evolution— tion as much as satisfaction and networks over- its future and its impact. Th at billions more burdened and unreliable in many parts of the people are poised to come online in the emerg- world. Or maybe the Internet has hit a wall, so ing economies seems certain. Yet much remains plagued by hackers and cyber attacks that it’s uncertain: from who will have access, how, given rise to a new digital divide between those when, and at what price to the Internet’s role with access to expensive security measures in as an engine for innovation and the creation of gated Internet enclaves and those who tread commercial, social, and human value. As users, warily across the free but dangerous Internet. industry players, and policymakers, the inter- Or maybe prolonged economic stagnation and play of decisions that we make today and in the protectionist policies have drastically dampened near future will determine the evolution of the demand for new devices and eroded people’s Internet and the shape it takes by 2025, in both willingness to pay for applications and services. intended and unintended ways.

All of these worlds are plausible. All of them Hence the need for scenarios—a set of diver- could happen. Are you prepared? gent stories about the future—to help us explore Today, in 2010, the Internet is already an integral and prepare for possible futures of the Internet. part of existence in many parts of the world. It’s To make sure that our scenarios are both rele- easy to forget the incomparably large strides that vant and logically related, we’ve organized this inquiry around two related questions: What forces will shape the Internet between now and 2025? How might the use of the Internet and IP networks (particularly with regard to emerging countries) evolve?

2 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 INTRODUCTION

For purposes of this report, we look at the Inter- today. Th is includes (under applications and net broadly, from both the mechanical and value content) the margin attributable to the Internet creation perspectives. Technically, the Internet from “e-commerce,” the enormous and rapidly can be thought of as a mesh of digital impres- expanding volume of purchases and services sions, storage systems, fi ber, radio frequencies, delivered over the Internet, from book sales transmissions, switches, screens, and terminals. to tax preparation. Th e volume of e-commerce But it is the complex array of relationships across is estimated at US$8 trillion annually, but we technologies, applications, players, and policies estimate the margin attributable to the Internet that defi nes the Internet as a creator of economic as a retail channel to be roughly on the order and social value. of US$0.5 trillion. Th erefore, the grand total for Internet-related revenue adds up to roughly At its base are policies and standards that shape US$3 trillion—and counting. Internet build out, interoperability, and security. Th e next tier, network infrastructure or In contrast to this transaction-based value, the backbone, comprises the cables, switches, rout- Internet’s social value remains immeasurable. ers, and towers that are the essential transmis- But we do know it is creating a whole new world sion grid for all Internet traffi c. Next there are of opportunity—transforming human interac- the connections—the on-ramps through which tions while at the same time challenging many individual and enterprise users plug in—and existing social and political structures. Although the enabling technologies like individual PCs, this is not the primary focus of our report, it is PDAs, phones, and IP networks that allow users an inevitable and powerful force for change. to tap the Net. Layered on top of that is content: streaming media, data, peer-to-peer (P2P) FRAMING THE $ communications, games, voice communica- 3 TRILLION INTERNET tions using Internet protocol (VOIP), and text, Use including e-mail. Finally there is usage, the ever- changing ways in which both individuals and Applications $ enterprises chose to consume Internet content. and Content 0.7tr

Th e four middle tiers of the stack (applications Enabling $ and content, enabling technologies, connections, Technologies 0.6tr and network infrastructure) generate about US$3 trillion in annual revenue, more than two- Connections $ thirds of which comes from advanced markets 1tr

Network $ Infrastructure 0.7tr

Policies and Standards

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 3 INTRODUCTION

Making sense of these possibilities calls for uncertain and most important in shaping the scenarios—stories of the future that are inten- path of the Internet in the next 15 years (see tionally diverse and stretch our thinking to Appendix 2 for a full list). Th ese drivers were accommodate both the expected and the condensed into three axes of uncertainty, unimaginable. By visualizing a broad range of which became the scaff olding for framing potential futures rather than making specifi c possible scenarios. predictions or following narrow forecasts, sce- • Finally we selected, from the range of plau- narios help to surface new opportunities and sible scenarios, four scenarios to develop in new risks and to explore plausible outcomes depth. We chose these for two reasons: fi rst, that could be game-changing. they challenged our assumptions, individu- Our process involved the following components: ally and collectively, about what might tran- spire; second, they suggested business and • We began with a broad review of open policy implications that were meaningfully source and proprietary research and projec- diff erent. Th e scenarios were then tested and tions (see Appendix 1 for a description of the refi ned with a range of subject matter and range of topics explored). Th is was followed scenario authorities. by interviews with experts and leading thinkers from within and outside Cisco, including members of GBN’s Network, to identify the drivers of change that might fundamentally alter the Internet’s future. Th ose interviewed were diverse in terms of perspective, loca- tion, and expertise.

• Th rough our research we identifi ed a set of premises that provided a foundation for all the scenarios. We then prioritized the change drivers according to those that were most

4 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 FIVE PREMISES FOR THE FUTURE

The future of the Internet will be driven, at least in part, by many dynamics that can already be seen today. Hence, we believe that there are features about its evolution that we can count on with confidence. Below, we offer five premises about the future of the Internet, drawn from our research, interviews, and analysis. These themes appear repeatedly in the scenarios, leading to quite different implications when combined with other possible developments that are more speculative in nature.

BY 2025: A major shift in global market structure will result from three factors that have compound- 1 Most growth in the Internet-related ing and accelerating eff ects. Th e fi rst will be market will have occurred outside economic growth: the diff erential between GDP of today’s high income, or “advanced,” growth in advanced and emerging countries economies. overall will be signifi cant and persistent—in 2 Global governance of the Internet will excess of 3 percent per year. Second, the pattern remain substantially unchanged. of growth in many of these emerging countries 3 “Digital natives” will relate to the will result in rapid expansion of their middle Internet in markedly different ways classes—both in numbers and in purchasing than earlier generations. power. Th ird, Internet usage and, fast on its 4 Today’s keyboard will not be the heels, broadband connections will grow quickly primary interface with the Internet. in emerging countries, but will reach a plateau 5 Consumers will pay for Internet soon in the advanced countries, characterized connectivity in a much wider range by slower growth and aging populations. of ways. Th e impact of these three factors is represented Each premise is described in greater by a metric we call the “Internet economy,” detail below. which approximates purchasing power in the hands of Internet users. Advanced market Growth in the global economy and 1middle class will occur primarily countries accounted for about 85 percent of the outside today’s “advanced market” Internet economy in 2005; their share is esti- countries. Transactions for Internet- mated to have fallen to 70 percent in 2010. Our related products and services will premise is that emerging countries will account increasingly take place in countries that for more than half of the Internet economy by we now characterize as “emerging.” 2025, refl ecting their extremely rapid economic

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 5 growth, compounded by the desire to “catch Th ere will also be forceful arguments against up” in Internet use. Th is will be true not just in any such attempts on the grounds that they places like China or Brazil, but in a wide range of are likely to do more harm than good. But the countries small and large. absence of any viable global governance formula or persuasive alternative in terms of institutional Yet the dramatic shift in the composition of the structure will keep the set of rules currently gov- Internet economy is just a quantitative proxy for erning the Internet fundamentally unchanged an even greater qualitative impact. Th is will be between now and 2025. caused by the dynamics triggered as the potential of networks to improve productivity reaches Th e evolution of the Internet in the past 40 years virgin enterprise territories and as consumers has underscored the notion that it is in the net- of content from everywhere are located every- work’s nature to evolve organically and confi g- where. Although Internet traffi c will continue to ure freely as opposed to being determined by be heavier in advanced markets with higher per strict, static designs. Th is will remain a powerful capita levels of expenditure in and around the assertion going forward, leading governments to Internet, the dynamics and global composition focus their eff orts on preventive measures aff ect- of the market will be dramatically changed by ing the use of the Internet in their sovereign ter- emerging countries. ritories and possibly producing disparities not unlike those observed in fi nancial regulation. Whileile ourur scenariosscennarioss incorporateincororporatate varvariationsriationns onn thishis ppremise,, espespeciallyecial y in termserms of ddifffferen erentialial Th e bbodiesdies thathat haveave soo fafar beebeen invinvolvedved in grgrowthth rates betweenet n advancedva d andd emerg-er proposingro in andn promotingro ti InternetIn ne standardsan rd ingn economies,o theyth alla havea inn commonm n a willll remainma a featurer of thet landscape,n ap butu theyey profoundr n shift in the ggloball geographyg y of theh willl not acquirei a morem formalm mandatea e thann Internett t economy. theyy havee today.ay In largel measuresu thish premisere e refl ecects thehe lackk of alternativeslt at anda theth hurdlesur Governancev of the Internetn willwi 2remaina substantiallyn y the same.s e. It tthat wouldw d impedepe progresspr es towardow anythingh will reretain thet loose sstructuretu thath hasa mmore bibindingng on ththe internationalnte ati l llevel. characterizedct ed it all along,on dedespitee pressuresss s “Digitalig nnatives”—whoves —w hhave bbeen for greaterte controlon that wwill ariseri fromro 3rraiseded on tthe Internetnt et sincec thee occasionalal Internetern disruptions,pti s, includingud g lateat 1990s—will99 — l relater te to ththe Internetnte et in malicious ones.ne markedlyrke y differentd ere wayswa ththan do mosmost of today’sod s adults.a ults Willful disruptionn anda d illicitill use of thehe Inter-I ter- net—electronic fraud,d, ththefteft , aand deception—ecept on— MembMembersers oof thesthese webweb-savvy-savvy “Ne“NetNNet gegengenerations”en rationsns” will be as common in thee futurefuture as they have wwill tendtend to view the InternetInternerrnet assa ann extenderex endendder of been in the recent past. Brown-outsuts andd black-b theirr ownn cogcognitivenitivetive capabilitieccapabilitiescapaapabilbilitiesli s and asas a portalpoportaortaal outs will happen as a result of sabotage, vandal-andal titlto virtual all experience.experienc expeerience.rience.ce.e. (Whether(W(Whethe(WhWhhetherhhi herr thisthiilis alsoo leadsldd ism, terrorism—or system malfunctions.functionions. Th ese to a signifis fi ccant shifts innb brainbrabraiainin function,fufununctionncttionan, as somesoomme breakdowns will elicit sporadicporadic andd sometimessometimees stustudiesdies suggest,t, is beyonbeyondnd ouourr purpurviewurvvieww hherehere.)re.)) loud calls for enhancedced internationalter tion controlco rol of Th ey will interactinte act withw th theth InternetInte nett asa paparpartart offt theth the Internet. ambientnt eenvironmentviro men in wwhichich theyey llive;ve;e;; iinindeed,deeeeded

6 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 FIVE PREMISES FOR THE FUTURE

the Internet is likely to become much more Today’s QWERTY keyboard—and deeply embedded, even invisible. Th e notion of 4the language and interface hurdles it “connecting” could disappear almost entirely. represents—will no longer be the primary means of relating to the Internet as new Th ese digital natives will be less inclined to dis- technologies transform that relationship. tinguish between suggestions made to them virtually by Internet peers and suggestions made Th e QWERTY keyboard is a relic of another era. by peers with whom they have had face-to-face Its logic (minimizing jams in the hammer arms contact. Th ey will also be more likely to respond of mechanical typewriters for English language comfortably when the Internet asks them unso- typists) became obsolete long before the start of licited questions or invades their privacy. But the twenty-fi rst century. Yet English-language most importantly, digital natives will think computer keyboards still feature QWERTY and about the Internet as a general service platform, nothing else. like conversation or thinking—part of what Th e keyboard, however, is about to be over- makes us who we are and something we just do. thrown by a combination of voice recognition, As they reach the labor force, these digital bio-sensing, gestural interfaces, touch-screen natives will accelerate the trend among enter- versatility, and other technologies that will allow prises of all sizes toward relying on networks us to input data and commands without keys. as the multi-dimensional platform for business. Th e keyboard will fade away gradually as the One question that remains in the scenarios is people who learned to type on it age. the extent to which there will be signifi cant lags One major consequence of this change will be in the emergence of these digital natives across an explosion in the number of people who can the world: how large a minority of young people use the Internet, as well as in the types of things raised alongside the Internet will be required they can do with it. A post-QWERTY world is a to trigger a Net generation eff ect, especially future in which we don’t have to put something in countries with lagging adoption rates? Th e else down in order to pick the Internet up. Th e sequencing of Net generations emerging in Internet will be a constant parallel processor— countries that today have low Internet penetra- without QWERTY’s implicit Western bias. tion will have a signifi cant impact; the relative size of those in the overall population will also matter and compound the eff ect of demographic diff erences across the world.

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 7 FIVE PREMISES FOR THE FUTURE

Consumers will pay (or not) for entiated competitive off ers—will appear around 5Internet connectivity in a much wider the full range of transaction variables: bundling, range of ways, both direct and indirect, a la carte, as you go, off peak, tiered, introduc- compared to today’s predominant flat-price tory, balloon, pay for quality, pay for mobility, subscriptions. billing cycles, publicly supported pricing, terms As high-bandwidth applications explode, the and conditions, guaranteed, banded, bulk, spe- need to allocate available network capacity effi - cialty, and so on. ciently across time and users will be a major Almost everything that can be variably priced issue. Th e spread of wireless connectivity will will be. One-size-fi ts-all bandwidth options will also open up many new pricing models for be the exception rather than the norm. Current network access, such as easily bundling con- fl at-price plans will seem quaint in retrospect. nectivity and services. Capacity management Th e presumption that content delivery and considerations will force a major reshuf- connectivity should be considered as separate fl ing among pricing models (indeed, similar value propositions will also be subject thinking by service providers is already quite to experimentation. advanced). For the Internet, price elasticities have not yet played the role that they have We see the demise of one-price-fi ts-all, usage- assumed in virtually every other market. Avail- impervious pricing for connectivity as a given, able bandwidth or network capacity will have but the extent of technical progress on the to be allocated more effi ciently—and pricing is wireless front and the nature of capacity con- a well-proven tool for that. straints in the network (sporadic or sustained, widespread or spotty, policy-driven or sponta- Rapid proliferation of new tolling and mon- neous) will have major implications for how etization schemes will also respond to increas- this plays out. ingly fi ne consumer segments appearing across geographies, age groups, genders, and personal desires. Pricing preferences—and highly diff er-

8 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 AXES OF UNCERTAINTY

Th ese fi ve premises for the future of the Inter- In order to off er a reasonable range of plau- net provide a foundation of relative predictabil- sible and provocative alternative futures for the ity but still leave ample room for uncertainty. Internet in 2025, we synthesized the 14 critical From our research and interviews we identifi ed uncertainties into three axes. Th is allowed us to 14 critical drivers of change that span a vari- construct a scaff olding to explore a number of ety of economic, social, policy, and technology possible scenarios: dimensions. Th ese drivers are also highly uncer- • Will broadband network build-out be exten- tain, suggesting a range of possible outcomes sive as a result of the combined eff ect of pri- that could play a major role in the evolution of vate and public investment, or more limited? the Internet through 2025. Exploring the possible impact of these change drivers (listed and • Will technological progress be characterized explained in Appendix 2) was a key step in the more by breakthroughs or mostly represent development of our scenarios. incremental advances?

Th is breadth of coverage is important to our • Will user behavior (including the appetite for purpose, yet playing with too many uncer- ever-richer Internet applications) be unbri- tainties and scenarios can be overwhelming. dled or more constrained?

THREE AXES OF UNCERTAINTY

LIMITED NETWORK BUILD-OUT EXTENSIVE

INCREMENTAL TECHNOLOGICAL PROGRESS BREAKTHROUGHS

CONSTRAINED USER BEHAVIOR UNBRIDLED

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 9 AXES OF UNCERTAINTY

NETWORK BUILD-OUT bargaining power of various stakeholders and create opportunities for, or barriers to, compe- What will the global broadband tition between entrants and incumbents, wired network—its breadth and capacity— and wireless, and short-term and long-term look like in 2025? objectives. Approaches to policy and regulation will be forced to evolve with technology Th is axis of uncertainty focuses on key and Internet use—but how quickly? To what characteristics of the global network, including extent might more dynamic, far-sighted licens- carrying capacity, speed, and other quality fac- ing approaches overcome the historical inertia? tors. How these characteristics diff er around the How much “regulatory competition” will take world will signifi cantly infl uence what the Inter- place across countries and will it result in the net will look like in 2025—and how much of convergence or divergence of approaches? its promise of productivity, economic growth, social inclusion, and enjoyment will have Responses by market actors will also vary. How been realized. will investors and network operators react to the shift ing policy and regulatory landscape? Will Th e interplay of government policies and pri- diff erences in market accountability and in the vate investment decisions will be a major fac- time horizons for investment payoff lead to dif- tor in determining how this axis of uncertainty ferent private investment decisions in response plays out in time and space. Choices made by to the same government action? governments, national and local alike, will have a direct and indirect eff ect on network build- out and on the spread of wireless options. TECHNOLOGICAL Direct actions might include public investment PROGRESS in backbone or gap-fi lling networks, spectrum Will there be widespread technology allocation, and aggressive action to ensure that breakthroughs or will progress be more other types of infrastructure are available to be modest and incremental? shared by fi ber deployment or wireless trans- mitters. Indirectly, governments will infl uence Th is axis addresses the range of new options cre- network build-out through policies that aff ect ated by the evolution of the Internet. While fail- the incentives for network operators to invest ing to invest in R&D guarantees that there will be in expansion and improvements to both fi xed no technological progress, there is an asymme- and wireless networks. try, as R&D investment does not ensure technological breakthroughs. Th is axis refl ects the large Decisions that seem unrelated or tangential to element of unpredictability (even randomness) the objective of network build-out could have associated with eff orts to develop new technolo- major eff ects on private investment decisions. gies. Th e adoption rate of new technologies is Some of these policy, regulatory, and licensing also not easily predictable. National objectives, decisions will also infl uence the mix and relative

10 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 AXES OF UNCERTAINTY

such as the protection of domestic champions fi xed (fi ber) networks for conveying rich content or the creation of information and communica- and other demanding applications? tion technology (ICT) clusters, can also have an eff ect (oft en negative, at least in the short term) USER BEHAVIOR on the speed of technology adoption. How will enterprises and individuals Advanced uses of technology have a role to play relate to the Internet and how will their and breakthroughs that aff ect business-relevant preferences evolve? functionalities could have a major impact. But given the masses of potential Internet users Th is axis of uncertainty is about the choices waiting in the global wings, functionality is not that users—both individuals and busi- the only consideration: aff ordability will also be nesses—will make and that will, in turn, decisive. Technological progress that reduces shape overall demand for Internet access, costs (as experienced over the last two decades devices, applications, and content. Tradeoff s in connection with computer processing power and sensitivities center on price elasticity, and storage capacity) could have dramatic ease of use, security concerns, and con- eff ects on the shape of the Internet in 2025. Will vergence or divergence in demand patterns technology innovation result in rapid, steady across regions and user segments. declines in the costs of Internet-related hard- Global economic prosperity, GDP growth, and ware, including smart phones, netpads, and new income distribution trends across and within connection devices? countries will be major factors in translating Other areas of uncertainty—and opportunity— broader preferences into actual choices—and for technological progress include network eff ective demand. Th e economy will remain an capacity, wireless capabilities, and security pro- important backdrop, against which many of the tection. Will new security technologies emerge choices will be infl uenced by perceptions of need to better protect against both unintended and and by the evolution of preferences—including willful Internet disruptions? How will storage, generational diff erences. compression, and miniaturization technolo- How current users in high-income countries gies evolve and interact to expand quality and (where Internet traffi c is now growing at expo- reduce bandwidth needs at the same time? nential rates) respond to evolving options and How about interoperability? with what kind of price elasticity will also have a Finally, wireless is an area where technological major eff ect. But how the masses of new Internet progress, or the lack thereof, would have a criti- users react to their new experience with diff er- cal infl uence. Will wireless technology evolve ent business and consumer preferences will be rapidly enough to ensure reliable high-speed equally important. Will the bare-all tendencies quality, thereby off ering a real alternative to found in much current social networking, for

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 11 AXES OF UNCERTAINTY

example, emerge among the next 1 billion users? or will increasingly rich, multi-sense off ers How about among the billion aft er that? Criti- keep expanding the global appetite for virtual cal conclusions will be drawn by opinion lead- experiences? How will Internet use evolve ers about the overall security of the Internet among corporate IT departments and small- as a mechanism for trade, value creation, and and medium-size businesses—and where? How information exchange. How diff erent will those will the Net generations change their approach conclusions be in Mexico, Russia, Turkey, and to the Internet over time, and how activist will Indonesia, or across states in India? they be regarding government and corporate policies that aff ect their Internet use? To what extent will users trade off handsets for embedded access portals: on automobile dash- boards, on home walls, or in articles of cloth- ing? Will we experience a pendulum swing away from digital experiences (driven by tech fatigue or cultural discomfort with virtual life),

12 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 THE SCENARIO FRAMEWORK

Using the “axes of uncertainty” as the basic scaffolding, we created a scenario “cube” to visually depict the full range of possible future states, or scenarios, suggested by permutations of network build-out, technology progress, and user behaviors.

LIMITED NETWORK BUILD-OUT

EXTENSIVE BREAKTHROUGHS

TECHNOLOGICAL PROGRESS

INCREMENTAL

CONSTRAINED USER BEHAVIOR UNBRIDLED

Th e future could turn out to be anywhere in the notional playing fi eld represented by the intersection of the three axes. Among the many combinations of outcomes, we chose four to develop into scenarios. Th e choice of scenarios was not driven by how probable we felt the scenarios were, but by our attempt to provide a set of novel and divergent—yet plausible— stories of the Internet in 2025. In each scenario all three axes play a role, although their relative importance to the trajectory and outcome varies. Th e four scenarios are:

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 13 FLUID FRONTIERS: Th is is a world in which the Internet becomes pervasive and centrifugal. Technol- ogy continues to make connectivity and devices more and more aff ordable (in spite of limited investment in network build-out) while global entrepreneurship—and fi erce competition—ensure that the wide range of needs and demands from across the world are met quickly and from equally diverse setups and locations.

INSECURE GROWTH: Th is is a world in which users—individuals and business alike—are scared away from intensive reliance on the Internet. Relentless cyber attacks driven by wide-ranging motivations defy the preventive capabilities of governments and international bodies. Secure alternatives emerge but they are expensive.

SHORT OF THE PROMISE: Th is is a frugal world in which prolonged economic stagnation in many countries takes its toll on the spread of the Internet. Technology off ers no compensating surprises and protectionist policy responses to economic weakness make matters worse—both in economic terms and with regard to network technology adoption.

BURSTING AT THE SEAMS: Th is is a world in which the Internet becomes a victim of its own success. Demand for IP-based services is boundless but capacity constraints and occasional bottlenecks create a gap between the expectations and reality of Internet use. Meanwhile, international technology standards don’t come to pass, in part because of a global backlash against decades of U.S. technology dominance.

FLUID FRONTIERS INSECURE GROWTH UNBRIDLED USE* CONSTRAINED USE* TECHNOLOGY BREAKTHROUGHS* TECHNOLOGY BREAKTHROUGHS* LIMITED NETWORKS EXTENSIVE NETWORKS

BURSTING AT THE SEAMS UNBRIDLED USE* INCREMENTAL TECHNOLOGY SHORT OF THE PROMISE LIMITED NETWORKS* CONSTRAINED USE* INCREMENTAL TECHNOLOGY EXTENSIVE NETWORKS* * Indicates most critical determinants

In the next section we bring each of these scenarios to life.

14 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 FLUID FRONTIERS

In this world the Internet becomes pervasive and centrifugal. Technology continues to make connectivity and devices more and more affordable while global entrepreneurship—and fierce competition—ensure that the wide range of needs and demands from across the world are met quickly and from equally diverse set-ups and locations.

changing the structure of human interactions and lifestyles in the process. Th e early tip of a big iceberg was the arrival of e-books and Apple’s iPad, augmented by the availability and popular- It’s ity of open-source soft ware and applications for 2025, all sorts of new devices. Pricing innovations also and the Internet is ubiqui- spread with a vengeance, with providers off ering tous, extending its power and impact far and “menus” to individuals and businesses that feature wide. It’s being used by 5.5 billion people now, a startling number of off ers and combinations. 3.5 of them since 2010, meaning that more While investment in network build-out remained than two-thirds of the world’s population has relatively modest (in many countries, mixed regu- newly experienced the Internet. Th e exponen- latory signals discouraged private investment at tial growth in Internet traffi c was fueled by both various points in time), technological progress an explosion of cloud services on the business was breathtaking. Wireless technology generated side and a mounting appetite for video and high a frenzy of development in hot zones (no longer bandwidth applications among individual users. “spots”) around the world. Th e mobile Internet Th e resulting waves of productivity proved trans- is now a pervasive reality and the range of con- formative for the economic and social develop- nectivity options and combinations has expanded ment of countless countries, creating millions of everywhere. Th e downside to this booming devel- knowledge-based jobs. opment, however, is that public investment in net- On a more personal level, connectivity allowed works is more diffi cult to justify. people to discover and act on new affi nities that cross old boundaries of geography and culture,

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 15 Dramatic increases in data transmission effi ciency pelling promise. Th e arrival of young, Net-savvy enabled traffi c to grow at unexpectedly high rates. teachers and nurses made the diff erence, how- Yet computing power, storage, bandwidth, and ever, eroding divides and increasing effi ciency. devices all experienced radical downward price Widespread adoption of these services also paved movements, if not in absolute terms then cer- the way for more advanced technologies that use tainly as measured by functionality per dollar. multi-dimensional imaging, robotics, asynchro- Th e geography of innovation—technological and nous interactions with experts, and rich media managerial— also shift ed markedly. Today some that can be adapted in a variety of contexts. innovation still comes from traditional places Given such pervasive access to high-quality com- like Silicon Valley, but most is erupting at dizzy- munications, education, healthcare, and inter- ing speeds in places like Bogota, Cairo, Mumbai, active entertainment, it is fi nally possible to live Perth, and Zhanjiang. Breakthroughs in compres- and work anywhere. Otherwise remote areas are sion, screen, or interface technology seem to hap- now more attractive, partially reversing the trend pen overnight.

Much of this innovation and growth is being driven by “digital natives” (those under 35 in Some innovation still comes 2025), who have taken the workforce by storm, from traditional places, but bringing with them the expectations and skills to most is erupting at dizzying accelerate the use of technology. Already pioneers speeds in places like in adopting technology for socializing and fun, Bogota, Cairo, Perth, they are now turning their Internet acumen into a new wave of productivity and creativity. While and Zhanjiang. the generation gap is noticeable in many of the established advanced economies, it is especially toward urbanization and the sprawl of mega- signifi cant in the newly prosperous ones that were cities. But cities of all sizes are increasingly appeal- labeled “emerging” back in 2010 but now consti- ing, intensely connected, and reenergized by tute almost a quarter of the global economy. For- national and local “green and clean” policies. New tunately these digital natives are also enthusiastic technologies—and the global dissemination of about easing their “elders” into this brave new best practices and promising experiments via the world as they embed technology into the daily Internet—helped make the integration of sustain- fabric of life in ways we would have considered ability and economic growth not just idealistic but awkward, invasive, or both not so long ago. realistic. Th is benefi tted every part of the planet and especially the Global South. Th is generational boost also helped leapfrog such technology applications as distance educa- Th e bottom line is inescapable: technology in tion and remote healthcare, which struggled to general and the Internet in particular, have deliv- achieve critical mass earlier despite their com- ered. From Maputo to Milwaukee to Mumbai, the

16 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 FLUID FRONTIERS

Internet has become a fact of life, not just a nice intended to make someone’s transition online to have. More and more machines, compu- seamless. Yet many of the most touted inno- tational devices, sensors, and humans—alto- vations are the product of unusual alliances, gether numbering in the trillions—are now partnerships, and licensing agreements, rather embedded components of the World Wide than traditional R&D. To succeed, one eye Web. In the past decade, we moved beyond must always stay focused on the core—cost, having a conscious relationship with the pro- effi ciency, and sustainability metrics matter as cesses, wires, and screens that we rely on; it’s much as ever—with another scanning the hori- hard, even irrelevant, to say when one stops zon for signs of imminent disruption and fl eet- and the other begins. Whether it’s the carpet ing opportunities. Even the most agile com- that alerts medical services when an elderly petitors struggle constantly to stay ahead of the person falls in her home or the automo- emerging and morphing competition. tive system that adjusts your route based Looking ahead, there is no question that IP on traffi c, weather patterns, and food prefer- networks will continue to play a big role in ences, we now take for granted the depth, national, city, and enterprise competitiveness breadth, and consequences of connectivity as well as personal experiences and lifestyles. with everything and everyone. No wonder But in many parts of the world capacity limita- this is such a high adrenaline world, perco- tions are beginning to loom large. Th e question lating with the buzz that comes from being of how to fi nance the higher quality, exten- always on, always sensing, always interacting, sive networks that this densely connected, and always changing. rich-bandwidth world needs does not have an Th is is also an exhilarating—and unsettling— obvious answer. Public-private partnerships world in which to do business. Players prolif- for network build-out are the exception rather erate, rise and fall, and constantly iterate the than the rule and few governments have found value proposition around the Internet. New the courage to prioritize public network invest- technologies, new access models, and new ments. Can the forces of technological progress pricing schemes—concerning both content that enabled the Internet’s explosive growth and bandwidth—dominate the weekly industry from 2010 through 2025 be counted on to con- headlines. Th e development pipeline is full of tinue doing so indefi nitely, or will a major new toys, consoles, sensors, interfaces, and tablets policy approach be required?

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 17 Life in the unfolding world of FLUID FRONTIERS Meet Diedra, Mieko, and Slava.

There is no way DEIDRA is going to miss her favorite game show, “Date the Globe.” Especially not this latest real-time episode, in which a bachelorette from Reykjavik is posing really clever questions (instantly translated) to single men in Mumbai, Cape Town, Cairo, and a remote research station in Antarctica, in an attempt to find her true love. Deidra started watching the program on her 3D Flex Screen (located on the back of her backpack) while she was on the bus from work. Now she’s home and she’s starving, but she can’t miss discovering who the bachelorette picks! So Deidra “beams” the show onto the side of her fridge, which she can view clearly from her high-speed stove (her pasta water only takes six seconds to boil). Everyone can send real-time comments to the bachelorette and to the bachelors, so Deidra taps a 3D button hanging in the air and says the Cairo contestant’s name. “Hey, tell her you love her eyes!” Three seconds later, he does. Will it work? Deidra takes a final bite of pasta, and waits for the bachelorette’s choice. “I just know it’s Cairo man,” she cries, her fingers crossed.

MIEKO, a 39-year-old professor at Tulane University in New Orleans, stands in front of her computer’s 3D scanner in her underwear, hits “record,” and slowly turns around in a circle. Shuffling back over to her keyboard, she hits “send.” Almost instantly, a voice with a Thai accent fills her living room. “Those came through perfectly. Stand by for us to project your 3D dressing room so that we can get started.” Within seconds, she’s in a virtual dressing room with a three-fold mirror. “Stand on the green dot you see on your floor, and here comes your first style—the cocktail dress that you loved.” Suddenly, Mieko is “wearing”aring theth most stunning reddd dress she’s ever seen, custom-sized just for her. The deep V neckline is as flatteringg as she’d hoped, and thee sequins adda just the sparkle she wants for the upcoming banquet. This dress—thisdress— look—was—was why she was determinedermined to “try“ on” the styles of this particular Thai designer. “Mieko, you look amazing.ama But let’s try the dress in blue.ue. Just a gutgu feeling,” says the voice. Suddenly, her virtual dress switchess to a deep cobalt.alt. “Oh my God!” MiekoM whispers. “Gaston won’t be able to take his eyes off of me!”

SLAVA, a 46-year-old Internetnternet executive frofromm Ukraine, loosensloooosens his tie, his workday now done. Of coucourse, the end-of-day commute doesn’t takee long, given thathat the businesbusinessss meeting he just wrappewrappedd up took place via video-deo- conferencing technology set up inn his home office.of ice. Technically, Slava works for a firm babasedsed in New York CiCity. But thanks to incredible advances in videoconferencing,videoconferencing, he can workwor almost seamlessly—ass well as he could if physi-hysi- cally in New York—from his neww home in TuTumbes,mbes, Peru. PlusPlus, this Peruvian coastal ttownown has become a majorajor center for solar-powered server farms—andarms—and whow o better to overseeovers hisis company’s shshare of those servers than a man who loves swimming in these gorgeousorgeous PeruvPeruviann waters? “Slav“Slava, cann you take a ququick clientent videocall? SomSomethinghing about that new deal with the micro-servericro-server firfirm in Odessa?” he hearss through his eever-presentsent (in fact, embembedded)ded) ear piece. “Uh, sure,” he says, tightening his tie. Thehe beacbeach can wait.t. “OK, he saysays. “Put themem throughthrough.”

18 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 INSECURE GROWTH

This is a world in which users—individuals and business alike—are scared away from intensive reliance on the Internet. Relentless cyber attacks driven by wide-ranging motivations defy the preventive capabilities of governments and international bodies. Secure alternatives emerge but they are discriminating and expensive.

to the ”information superhighway.” Wireless, of course, was a big part of that story. And so much investment! Network infrastructure came to be seen as a key ingredient of national competi- It’s tiveness. Countries as diff erent as Peru, Turkey, 2025, and Vietnam all launched programs combining and the dream of the Inter- public funding and incentives for private invest- net as the great transformer is in shambles. Th e ment to ensure that networks extended the reach promise of a ubiquitous virtual platform through of broadband across geographies and social seg- which an ever more globalized world would col- ments—fast. laborate and think diff erently, and through which And yet our focus on the upside of connectivity all kinds of new businesses would change our lives made it possible to miss something big. As the in unimaginable ways, simply failed to material- world went about busily managing more and more ize. In fact, it’s hard to look back on the 2010s and of its fi nances, relationships, and business online, not blush. How trusting we were. And, in some everyone just assumed that the platform was fun- ways, how foolish. damentally secure in some capital-S kind of way. Even 10 years ago, in 2015, the dream was already Sure, the Internet was home to its share of scams, tarnishing. Security breaches and data swipes viruses, and stolen identities, but these seemed were becoming more frequent and their conse- more annoying than dangerous. Plus, weren’t quences more serious. Yet network build-out con- there organizations and initiatives dedicated to tinued its march around the world, reaching even policing all that? (Hundreds of them, as it turned the remotest of places where few thought they’d out—but oft en poorly coordinated and sometimes ever see a computer, let alone high-speed access at cross purposes.)

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 19 Even so, how were we to know that the security users limited their online activities to the websites wall between our everyday Internet use and the and businesses of known brands—particularly nefariousness on the other side was as thin as the those that had redefi ned themselves around safety spyware on any given laptop or PDA? Th ere we ratings and standards and touted their big invest- all were, typing and texting, forwarding personal ments in security, encryption, and fraud control. documents, accessing YouTube clips, plugging Impulsive Internet shopping was now a thing of addresses and credit cards numbers into online the past. forms, making payments on our mobile phones, Safety was not cheap, and users fl ocked to expen- and thinking that our anti-virus soft ware or our sive private networks and online “gated commu- IT department fortifi cations were suffi cient. We nities” that promised bolstered security (even didn’t realize that if we were to put our ears right if they didn’t deliver). For those who couldn’t up against those fi rewalls, we’d hear the shuffl ing aff ord such services, the only alternative was of thousands of vandals, fraudsters, and cyber- to be super-vigilant and limit online time and terrorists just inches away. activities. For many, once-common practices like In retrospect, the highly publicized attack on downloading soft ware updates and iPhone apps Google in 2010—and, equally alarming, Google’s or trading stocks through the open Internet were intimation that it wasn’t sure if it could block deemed too dangerous. attacks from happening in the future—should have made the holes in the fi rewall more vis- ible. But it wasn’t until reported incidents of Combating cyber-terror and mega-hacks became commonplace—and seem- cyber-crime has become a ingly unstoppable—that we fully realized our continuous, high-cost, low- predicament. Advising users to “install patches return endeavor, much like to operating systems” or “avoid clicking bad links” was like telling someone to duck against the old war on drugs. a hailstorm of bullets. Th e complexity and clev- erness of these attacks far exceeded the tools Th e retreat of wary consumers from the Internet available to combat them. In 2015, an issue (or, at least, their new usage patterns) froze many of Th e Economist asked on its cover: “Who Is IP-based initiatives that had been in the works Foolish Enough to Trust the Internet?” and shook up all kinds of enterprises. In the IT So we all woke up—and rather abruptly—from industry, well-established soft ware providers saw our shared dream of an Internet that was funda- their market positions strengthen while upstart mentally “good.” We didn’t give up on the Internet brands and service providers struggled. Mean- entirely; we just adopted a much more wary and while, the world of e-commerce was turned on its circumspect approach. Young, intrepid “inter- head. Many companies that had redirected their nauts” adapted by self-editing what they revealed marketing strategies online swung back toward on social networking sites. Many other Internet more traditional approaches. Alliances of strong

20 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 INSECURE GROWTH

brands anchored by “bricks and mortar” and delighted by the shift , which holds little appeal secure technology found their footing once for malicious intruders. Still, the Internet could again. Some banks chose to rebuild their street- have been and done much more, if only it could front branches while others invested in super- have been secure. secure networks (and access procedures) hoping Th ere were other bright spots. Print media— to keep Internet banking alive, at least for high- including newspapers—didn’t die as predicted. value clients. Similarly, “cloud service provid- TV has experienced a renaissance of sorts, with ers” developed new ways to be both fail-safe and limited interactivity that mimics the Internet connected, but this made the cloud prohibitively but is nowhere near as risky. And all that rapid- costly for many smaller businesses. cycle innovation in products and services that All this did not, however, keep malicious once fl ooded the marketplace has been largely hacking and illicit Internet activities from replaced by quality-assured innovation. In fact, proliferating. It did contain their impact—but a lot of the frenetic pacing of life in the early at considerable cost. Even now, in 2025, it’s 2010s—facilitated by our addiction to con- clear that cyber attacks can’t be stopped— nected devices, ubiquitous access, and instant not outright and maybe not ever. Policing gratifi cation—has slowed down. Th e placement the virtual world is harder than policing the of products and services on the Internet is now physical world. Combating cyber-terror and measured in years, not months. cyber-crime has become a continuous, high- Still, there are many enclaves where sophisti- cost, low-return endeavor, much like the old cated use of secure networks does provide major war on drugs. benefi ts because the scale of revenues is large Th ere was a silver lining, though. With connec- enough to bear the associated costs. Many of tivity levels and Internet familiarity quite high the applications thriving in these enclaves could in many countries, the Internet has become less easily be expanded to much wider markets. of a medium for economic activity or high-tech Th ere is hope that new security technologies will interaction and more of an environment for make that possible (undoubtedly resulting in the community activity, cultural and artistic shar- emergence of the new IT giant of the 2030s). But ing, and political activism. Th e “back to basics” for the time being, so much insecurity is gravely proponents of this less mercenary Internet are hindering the Internet’s growth and potential.

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 21 Life in the unfolding world of INSECURE GROWTH Meet Alvaro, Ludmila, and Deepak.

ALVARO, a 29-year-old dentist in Sao Paulo, enters the Rapid Security Pod attached to his local Banco Itaú branch and steadies himself for the barrage of BICs (biological identity checks) that will be run on him in the next 46 seconds. First comes the iris recognition scan, then a finger prick to confirm his blood type. “This is a lot to go through just to use my ATM card,” Alvaro mutters. But then he remembers how awful it was to have his bank account hacked—12 times. Plus, going through BICs wasn’t all bad, thinks Alvaro, as a sultry woman’s voice fills the soundproof pod, posing to him a series of “random” questions designed to elicit the right syllabic fodder for voice recognition. “I love that woman,” Alvaro whispers, a bit embarrassed that he’s dreaming—not for the first time—of dating a disembodied voice. His BICs confirmed, an inner door opens. Alvaro whips out his ATM card and gets to his banking.

LUDMILA, a 23-year-old computer programmer in Moscow, stares down at her fingers. Possibly criminal fingers. After graduating with honors from university, and winning awards for her thesis on “Deflecting Service Attacks from the Asian Triad: Three Approaches,” Ludmilla had desperately wanted to join ROPF, Russia’s online police force. But during the initial training, she quickly realized that ROPF’s methods—and its cops— were not nearly fast and smart enough to catch the cybercriminals who were fast turning the Internet into their own dark playground. Plus, she had bills to pay and parents to support, and it would be so easy to join any of the dozens of hacking networks that keep trying to woo her—including the Triad. “Maybe I’ll just check out the dark side for a little while,” she thinks, as she opens a blank email and types in “[email protected].”

DEEPAK, the 56-year-old owner of a top Indian Internet security firm, hits the “end call” button on his mobile phone and lets out a sigh. This wasn’t the first pleading call he’d received today, and he was sure it wouldn’t be the last. After Friday’s epic hack attack, in which the identities of 1 million Indian citizens were swiped, everyone and his uncle began to call Deepak, begging him to let them inside the protective walls of WebBarb, the high-end, ultra-secure gated online community that he manages. Indian millionaires paid dearly for the protection afforded by WebBarb. Yet his friends and family want in for free. Deepak feels badly that the only people he can help are the very rich—but not that badly. The kind of protection afforded by WebBarb costs big money to provide. Let his cousin’s uncle in for free, when there’s a waiting list of people willing to pay handsomely to join WebBarb? No way!

22 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 SHORT OF THE PROMISE

This is a frugal world in which prolonged economic stagnation in many countries takes its toll on the spread of the Internet. Technology offers no compensating breakthroughs and protectionist policy responses to economic weakness make matters worse—both in economic terms and with regard to network technology adoption.

Th e early 2010s seemed full of promise, as a mounting body of data showed an undeniable connection between high-speed broadband and economic growth. Th is persuaded many govern- It’s ments across the world to include broadband in 2025, their stimulus programs. Various combinations of and the news on the Inter- public funding and incentives for private invest- net front isn’t good, particularly considering the ment signifi cantly expanded broadband networks potential that was envisioned back in 2010. It and improved the quality of connections. While could be worse, of course: the number of Inter- the pressure of fi scal defi cits soon constrained the net users has doubled (to 4 billion people) and is more ambitious programs, considerable progress far more distributed than it was 15 years ago. Th e was made in expanding the reach and capacity of big disappointment, though, is that many of those broadband networks. “traveling” the Internet today are doing so with Th e biggest surprise: these ambitious investments only basic functionality. Sure, the super broad- in broadband have resulted in overcapacity. Of band Internet of full-immersion gaming, stream- course, given the sustained economic pummel- ing 3D, and split-screen functionality exists—but ing that the world has taken over most of the last only a few people in very few places can indulge decade, the more modest evolution of the Internet in it. Across the globe, the Internet just hasn’t isn’t exactly surprising. When economic recovery advanced in the whiz-bang way that the extrapo- failed to consolidate aft er a promising bounce in lation of trends from the late 2000s would have 2010 and 2011, economic malaise spread glob- predicted. Not even close. ally. Cautious consumers and hobbled banks in

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 23 the West dragged everyone down, and income Lower-cost providers got creative, fi nding inven- growth in emerging markets was set back by years. tive ways to segment markets and cater to frugal Nobody was unaff ected by this second wave—and users through off -peak pricing, limited-quality no one escaped the lean times that followed, par- connections, and other off ers. Business models ticularly in countries without robust institutions. that depended on teasers to sell premium pack- Financial dynamics changed dramatically, and ages were severely squeezed as consumers fl ocked individuals and corporations alike had to work to to free off erings and resisted upgrades. Advantage rebalance their debt loads even as they watched tipped to local service providers and technology the value of their assets diminish. Fiscal defi cits companies that could off er right-size or bite-size also demolished any chance of further stimulus deals and packages. packages in most advanced markets. Most new and existing users seemed more focused Consumers worldwide refrained from spend- on basic functionality and service than on high- ing their money, if they were lucky enough to be end entertainment or virtual immersive experi- earning an income. Sparse cash and competing priorities meant that most global citizens—even The people who came those inching into the middle class—were forced to make tough spending choices. High unem- online during the 2010s ployment rates and aging populations produced turned out to be surprisingly increasingly large social carrying costs that no low-revenue business one seemed prepared for—least of all the mega- opportunities...and sought cities that swelled with new arrivals. Against this bargains at every corner. backdrop, indulgences like 3D-HD home entertainment systems seemed beyond excessive—and the subject of scorn—except for small up-market ences. Screens, speakers, and ever more interac- segments in high-income countries. tive and ubiquitous interfaces weren’t everyone’s idea of a good time. As a consequence, many of the What did all of this mean for patterns of Inter- newly connected cultural and ethnic groups never net use? Plenty. Th e nearly 2 billion new Internet got addicted to the Internet and even showed a users who came online in the 2010s turned out to tolerance for government controls over content. be surprisingly low-revenue business opportunities. Th ey were careful consumers of online off ers A similarly Spartan attitude aff ected business: and sought bargains at every corner: on devices, enterprises fl ipped their focus on profi ts into an on service packages, and on content off ers. Th ey obsession with cost management. Overall pres- also used e-commerce sparingly and weren’t fond sure on the bottom line also had big implications of bells and whistles, exhibiting a preference for for R&D expenditures, dampening the emergence Internet essentials like VOIP, e-mail, and modest of new technologies and tangling them in lengthy P2P applications. development cycles. Flash-in-the-pan innovations were tabled in favor of ones that improved dura-

24 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 SHORT OF THE PROMISE

bility. High-end design continued to speak to the required alternatives. In those instances, the small and shrinking elite consumer niche, tough partnership agreements based on tech- but the overall attractiveness of that space nology transfer were negotiated. National own- was limited by the ferocity of the competition ership requirements for companies in virtually and the modest prospects for growth. Opti- all ICT-related areas also increased with varied mization, standardization, streamlining, and results: in some cases leading to inferior net- focus became boardroom buzzwords. Platform work performance, in others delayed adoption interoperability became more important than of readily available technologies. ever: switching costs are now the nemesis of Now, in 2025, there is still near universal rec- hardware manufacturers seeking to introduce ognition of the potential of broadband as basic next-generation technologies. infrastructure and yet there is much unrealized Relentless economic and social pressure turned potential and growing divides between the digi- many governments protectionist, and not just tal haves and have nots. Eff orts to expand the in terms of trade. Sheltering national compa- breadth and depth of connectivity continue to nies, including Internet and other technology be trumped in many countries by immediate service providers, from challenges by foreign government concerns related to employment competitors was a high priority. Th e rhetoric and social safety nets, and by the trade off s faced revealed a deep-seated backlash against exces- by many people around the world, between, for sive dependence on the leading hardware and instance, investing in smart communication soft ware companies (mostly American and devices and the need to satisfy more basic needs. European) that had long supported Internet If and when that will change is anyone’s guess. use. Of course, not all countries possessed Meanwhile predictions of lasting economic credible technology fi rms that could deliver recovery keep proving to be wrong.

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 25 Life in the unfolding world of SHORT OF THE PROMISE Meet Anjali, Norman, and Radu.

ANJALI, a 42-year-old Bangladeshi shop owner, rips open the big box she’s just received and whistles. Inside are dozens of old smart phones—discards from the West and Japan—that have been refurbished and reloaded with more basic software and interfaces by ReeFur, a top Indian technology recycling company. She picks up an ex-iPhone—the little apple now buried beneath a ReeFur sticker—and turns it on. What was once an app-filled screen is now a vision of simplicity: one small square icon for Internet access, another for phone calls. Nothing extraneous or flashy. Just the essentials and a couple of extras—which, in fact, is all her customers will pay for. “These phones will fly off my shelves,” says Anjali, already calculating her next order.

This sucks,” says NORMAN, a 51-year-old product rep manning a table at the 2020 Houston Consumer Electronics Fair. Looking around, he wonders if the misery and boredom written on the faces of the other product reps mirrors his own. Norman has set up his display of next-generation handheld holographic videogame modules so beautifully—really, it’s the most becoming display job of his career. But the only people here to appreciate it are the other reps. There are barely any customers—then again, there are barely any buyers at all anymore of the kinds of whiz-bang stuff his company is still trying to sell—with less and less success. Consumers just aren’t mesmerized by features and gadgets that are expensive and pricey, the way they used to be. “No one even wants the free samples,” mutters Norman. He glances over at the Bluefang rep running the next booth, who is filing her nails. “Yep,” says Norman. “This sucks.”

RADU, the 29-year-old Romanian founder of a small and innovative ISP, stands before his staff, buzzing with excitement. His company, Micuta Faina (“tiny meal”), has just been named the most innovative company in Eastern Europe. Its core offering: Internet service payment plans to match the customer’s budget—even day by day—rather than monthly subscription. “We saw an opportunity that bigger companies—particularly big Western companies—have flat-out missed,” says Radu. Cost-crunched consumers are trimming their spending as much as possible. So the idea of paying per day as/when you can afford it—forget all those unused hours!—had broad appeal. As a result, the very customers that the big players continue to dismiss as low-revenue opportunities—are the very ones who have now turned Micuta Faina into a huge success. “If these other companies had listened to their consumers, this could have been their idea,” says Radu, raising a glass. “Here’s to the low revs!”

26 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 BURSTING AT THE SEAMS

In this world the Internet becomes a victim of its own success. Demand for IP-based services is boundless but capacity constraints and occasional bottlenecks create a gap between the expectations and reality of Internet usage. Meanwhile, international standards don’t come to pass, in part because of a global backlash against decades of U.S. technology dominance.

accepting of the status quo. Th ey’re challenging. Th ey have remarkably high expectations, demanding options and functions that are way beyond what the prevailing standards, protocols, It’s and infrastructure can deliver. Many hail from 2025, developing countries and most of them are young; and the Internet is hardly indeed, the growth in Internet usage since 2010 the sleek bullet train we anticipated. It’s more has been mostly among people under 35 from out- like a locomotive working at the limit, burdened side the old high-income economies. with an increasingly heavy load and blowing the And these users aren’t adapting in quite the way occasional gasket as it strains to keep pace. Th e we expected either. Th ey are restless and not eas- load, of course, consists of users and content— ily corralled into loyalty. For example, the land- both of which continue to pile on the train and scape of social networking sites that existed 15 never get off . years ago when Facebook dominated has changed Internet users now number more than 5 billion— dramatically and now contains hundreds of sites, that’s 3 billion-plus more than there were in 2010. with much more fl uidity between them. Users Of course, this phenomenon was not unexpected. are also making unexpected tradeoff s: the digital But it turns out that imagining what it might be natives who were raised on, and some say by, the like for so many people in so many places to be Internet have surprised Silicon Valley by eschew- online and actually experiencing it—the stresses ing HD and streaming video, opting instead for it creates, the pressure on the network—are two simpler forms of highly visual communications. entirely diff erent things. In addition, hoards Th e image quality might be mixed, but the price of these new users aren’t passive and simply is right and the sense of spontaneity trumps other

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 27 characteristics. Also, rather than adopting sophis- tunities and scale rapidly to become global play- ticated new applications and devices, these young ers. Yet “grassroots” business models focused on innovators are ingeniously adapting technology smaller, specialized, and nontraditional markets already in existence, with one of the more popular also proved key, enabling bold entrants to chal- ones being “like” the visual, low-cost equivalent of lenge the incumbent leaders who couldn’t adapt SMS “texting.” quickly enough. Device manufacturers were particularly shaken when demand for sophisticated In terms of content, the volume of new informa- devices plummeted; many of these new consum- tion being created is astronomically high—all of ers wanted value—not fl ash and bang. which has needed to be organized, safeguarded, and stored. By 2020, in the U.S. alone, Internet Meanwhile, the notion that Internet access should traffi c was 100 times greater than it was in 2010. be considered a basic human right gained more And much of the rest of the world experienced and wider support. If the Internet was critical to even more dramatic expansions. Anything, any- national economic development and the deliv- where that can be put online, is. As a result, the platform is now so overfl owing with content, New users have remarkably coordination signals, and basic communications that it seems fi t to burst. high expectations, demanding options and functions that are Th e “cloud” has felt the pinch of this, as network way beyond what the prevailing reliability is in doubt and storage capacity still remains cost-eff ectively based on the client device. standards, protocols, and Extremely thin devices have evolved too, but they infrastructure can deliver. are considered an alternative (and one that comes at a price) rather than the hands-down preferred ery of a whole raft of services like education and choice. One of the strongest market plays to healthcare, the advocates argued, then unfettered emerge in cloud computing has combined cloud individual access would only accelerate progress. services with a dedicated high-quality network. Plus, the demand for access from individuals all Th e move by one of the major global hardware over the world was almost deafening. Civic insti- manufacturers to acquire a collection of small tel- tutions, NGOs, and infl uential supranational cos and turn them into a global niche ISP caught organizations like the UN were clamoring for much of the competition in both fi elds by surprise. it too. By 2018, the “Internet for all” movement For a company to make money in this environ- seemed unstoppable and basic access began to ment, it has to be nimble. Th e management teams spread quickly across the globe. Unfortunately, that seemed to intuitively grasp the evolving com- that created quite a paradox: it worsened system petitive landscape were those that honed their congestion to the point that plans to extend basic skills in the fast-moving, messy world of emerging access to many low-income pockets were back- markets in the 2010s. What they all had in com- logged or delayed. mon was the ability to turn challenges into oppor-

28 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 BURSTING AT THE SEAMS

Th is dilemma was compounded by the mod- applications and an attractive base for Internet est investments made in network build-out innovators. Elsewhere, large islands of good and improvements over the last decade. Incen- connectivity were surrounded by vast expanses tives for private investment were oft en eroded of overburdened networks with poor reliability, by regulations to extend network access and speed, and quality. prevent discrimination, without any signifi cant Now, in 2025, the question on everyone’s mind public investment in backbone to compensate. is, “What happens next?” We are addicted to Other policies relevant to the Internet shift ed as connectivity and everyone—literally everyone— well. By 2020, many national broadband plans is counting on it to keep expanding. But the lim- showed overtones of defense technology policy, itations are too obvious to ignore and no one is as happened earlier in the century with energy. sure how to climb up to the next plateau. As dif- In retrospect, of course, this might have been ferent players seek to circumvent the constraints anticipated. Not only did the absolute power of existing networks, and in the absence of new of the technology point in this direction, but network-enhancing technology breakthroughs, there was also a signifi cant desire to level the a few post-emerging governments are quietly playing fi eld around U.S. technological domi- supporting research on wholesale alternatives nance. Th e lack of agreement on upgrading the to the well-worn Internet protocol. Th ere is protocol to IPv6 was largely attributed to the rampant speculation on the direction and prog- geopolitical undertow. ress of that research and now rumors are fl ying Nevertheless, there were a smattering of that somewhere a new protocol is about to be small countries where visionary governments launched. China and Russia are the odds-on tried to combine their nation’s quality-of-life favorites, although a surprising number of less appeal with high-speed, high-quality capac- prominent countries are mentioned as well. ity—successfully creating a test market for new

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 29 Life in the unfolding world of BURSTING AT THE SEAMS Meet Issa, Anna, and Dzong.

Haraka haraka haina baraka. The old Swahili proverb (haste makes waste) was not meant to apply to the new high-speed connection linking Mkokotoni, a village on the island of Zanzibar, to the outside world. Until today, the village had been known mainly for its tuna and king mackerel fishing and its bustling daily fish market. But today, Mkokotoni would become the first village on Zanzibar to have a live video link to Japanese fish brokers. The fishing cooperative leader, ISSA, has made a big deal of the symbolic “flipping of the switch” ceremony (the high-tech version of the symbolic ribbon cutting). After a brief speech, Issa presses the remote and … nothing. He tries again. Nothing. Peter, the representative sent from the South Africa-based service provider, puts down his camera—he was poised to capture the glee they were all expect- ing—and begins frantically checking and rechecking the connections. Peter has no idea how to tactfully tell the village leader—and all the fisherman clustered behind him—that the system is congested, the ceremony a victim of the increasing burden placed on existing networks with every geographic expansion. “I sooo did not sign up for this,” thinks Peter as he puts on a big smile and walks nervously toward Issa and the crowd.

“I’ve got one!” shouts ANNA, a 22-year-old intern at Verbindungen, a Munich-based, all-volunteer organization that scans the country for “discrimination” perpetrated by service providers (the name means “connected”). Anna’s find is a perfect example: an ISP operating in Eastern Germany seems to have a pattern of slower packet traffic from non-partner sources and to lower-revenue generating connections. Anna’s fellow volunteers let out a whoop, and she beams with pride. She can’t wait to tell her dad—one of the biggest supporters of the “Internet for all” movement she knows—that she just found something that could make a real contribution to thee campaign.campa With the Interneternet so critical to delivering healthcare and education around the world, high-speed access is essential. It must be assured!ssured! “Back“Ba to work,” Anna thinks. “We must do case studies to show activistss in otheroth countrieses what tot watch for.”

DZONG, a 16-year-old Vietnameseetnamese boy, useuusedsed to feel so boboredoredd sitting on a stool for hours on end, watchwatchingchinng over his mother’s low-traffic souvenirenir shop in HanoHanoi’snoi’’s Old Quarter aandd cconnected to his frienfriendsds only through clumclumsyummsy “texting.” When the occasional touristourist wandered in too peruse the silssilkilk scarves or study a set oof chopsticks, DzonDzong hadd felt eternally grateful to them for disruptingupting his stustupor.or. But now he doesn’t need the tourists fforor that. Now he hahas thee Bia Hoi, a new device that connects him to his friefriendsnds and to the InInternetnternetn for cheap. Named after the super-inexsuper-inexpensivensive Vietnamese beer that Dzong’s parentsrents still thinthinkk he doesn’t drink—asdrinkk—as if!—the Bia Hoi is the brilliant creation of two young Vietnamese entrepreneurss not much olderolder than Dzong. Thee device can do all sosortsts of cool stuff, like projectroject media onto any screen and conductduct lightning-fastlightning ast Internet searches.sea es. But it’s also affordable,af dable, primarily becausebe use it somehow uses much less bandwidthwidth than the alternatives.ternatives. Now all of Dzong’s friendfriends havee Bia Hois, and thethey spend much of the day sending stuff too one anotheanother: filmlm clips, textstexts, etc. The only thing they can’t do is watch mmediadia in HD—a high-price function the Bia Hoi doesndoesn’t allow.w. “But who cares?”?” thinks DzoDzong, as he starts up ananother videoideo game on his device, sitting on his stool in the tourist-lessst-less sshop.

30 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

Having developed four scenarios to help us the level of Internet use and the composition of explore alternative, plausible futures for the the global Internet economy. Internet, we can play with them in a variety Th e level of Internet use encompasses both its of ways. Yet it’s important to remember that breadth (how widespread the Internet is; what the value of these scenarios has nothing to do proportion of the global population uses it) and with whether we accurately predict the future depth (how intensively the Internet is used and 15 years from now (which is unlikely to hap- how much traffi c it carries, defi ned as the global pen in any case). Scenarios are useful because median of Internet traffi c per user). As shown they help us to see emerging patterns diff er- in the fi gure below, the level of Internet use is ently, to separate “the signal from the noise” highest in Fluid Frontiers and lowest in Short of so we can detect big risks or opportunities in the Promise. In Bursting at the Seams, Internet use advance, and to rehearse ways of managing unforeseen challenges. INTERNET USE ACROSS THE SCENARIOS PLACING THE SCENARIOS IN FLUID PERSPECTIVE FRONTIERS BURSTING We have already described the diff erences AT THE SEAMS across our scenarios in terms of their characteristics (the change drivers behind the axes INSECURE of uncertainty) and in terms of their texture GROWTH and feel (what it might be like to live and do SHORT OF THE

business in these futures). Before proceeding DEPTH PROMISE to sketch out the implications from diff erent angles, however, it is helpful to compare how diff erent the Internet looks in 2025 in each of the scenarios according to two key metrics: Depth = Internet Traffic Breadth = Internet Penetration

BREADTH

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 31 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

INTERNET ECONOMY ACROSS THE SCENARIOS is deep in many areas but somewhat less distributed, while the reverse is true in Insecure Growth, due to prevailing concerns about security. BURSTING AT THE SEAMS FLUID In our fi rst premise about the evo- FRONTIERS lution of the Internet at the beginning of this report, we postulated SHORT OF THE INSECURE that emerging countries would PROMISE GROWTH represent at least half, and at most

three-quarters, of the global Inter- DEPTH net economy in 2025. In the Fig- ure to the right, the composition of the global Internet economy is Emerging depicted relative to each scenario 2010 Advanced as arrayed in the previous fi gure. Short of the Promise is the world in which the emerging countries BREADTH do least well, accounting for about half of the global Internet econ- policymakers. Both are, of course, ultimately omy in 2025 (up from 30 percent in 2010). concerned with their eff ect on and relationship In Fluid Frontiers, however, the rise of emerg- with all users of the Internet: individuals, enter- ing countries continues unabated; by 2025 they prises, and institutions. represent three-quarters of the global Internet Th e primary concerns for each of these audi- economy and overshadow the old advanced ences, respectively, can be summarized in two countries in terms of both demand and supply questions: what business models will best estab- for Internet-related products and services. lish a sustainable, profi table position around the Internet of the future; and what are the policy EXPLORING IMPLICATIONS challenges that need to be addressed—prefer- ACROSS SCENARIOS ably before 2025—in each scenario.

Th e Internet is a pervasive, complex phe- Whether you are a leader in industry or nomenon that encompasses many actors and policy, the future is likely to surprise you stakeholders. We hope these scenarios, and despite skilled forecasts and data-rich analy- the underlying discussion of driving forces ses. By using these—or your own—divergent and uncertainties, will be useful to all of them. scenarios to rehearse the future, you will be But, as noted in the introduction, we have two better able to anticipate, respond, and adapt primary audiences in mind: decision-makers to an uncertain future. in corporations directly involved in the business of the Internet and national leaders and

32 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

WHAT IS THE BUSINESS transactions and horizontally toward bundles of off erings. Th ese types of changes will shape MODEL FOR 2025? the diff erent business models that are likely to Th is is the question we used to anchor the be successful in each of the four worlds that our exploration of implications for Internet indus- scenarios portray. try players. If you are an industry player, consider the fol- One way of examining the business model lowing questions: implications of the scenarios is to look at how • What assumptions are you and/or your com- the dynamics between providers and users pany implicitly making about the world in might diff er in each of them. Th e framework 2025? Which scenario comes closest to your below is designed as a launching pad for this assumptions? How will your business model exploration. On the horizontal dimension we evolve to succeed in that world? consider the basis on which the providers of the key Internet components interact directly with • What happens to your business model in the users (both individual and businesses). On the other scenarios? What are the big challenges vertical dimension we provide a simple classifi - or opportunities that might arise? cation of the types of transaction that character- • What early indicators or signposts should ize the user/provider interaction. you be tracking so that you know when to BUSINESS MODELS (Illustrative) revisit or adjust your strategy? PROVIDER Transaction Software & Devices Connectivity Content (PCs, PDAs...) Services WHAT ARE THE POLICY Buy CHALLENGES BY 2025?

Subscribe Th is is the question we propose for policymakers to consider in exploring the scenario Pay Per Use implications.

“Free” Our framework to address this question starts with three dimensions of desired outcome Working through this framework, we start (across the top) regarding Internet connectiv- with a fairly well-established “enclave” (PCs ity, which we see as being a basic components of are bought, as is most soft ware). Connectivity, modern life in 2010 and enshrined as a universal however, is typically by subscription and the right by 2025. Th e framework also examines the drift towards “free” (or, more accurately, indirect diff erent challenges presented by moving toward payment) is already in play—particularly for these desired outcomes with respect to three key content but with some open-source soft ware as dimensions of Internet connectivity: inclusive- well. Yet some of our scenarios will signifi cantly ness, security, and quality. shift this paradigm—vertically toward “free”

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 33 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

Th ese challenges are worth considering sepa- support for countries that might be lagging rately at both the international level and the behind in Internet access. national level. (Addressing the challenges faced Within this context, the questions that policy- by local governments is also relevant and needs to makers need to ask are similar to those for the be tackled within their specifi c national contexts.) industry players: At the national level, the framework off ers a way • What assumptions are you and/or your gov- to explore the pending agenda for policymakers ernment/organization implicitly making with the relevant mandate and accountability. about the world in 2025? Which scenario Th e current situation varies widely but in many comes closest to those assumptions? countries policy making vis-à-vis the Internet is still in its infancy and more at the policy formu- • How do you defi ne success and what policies lation than the implementation stage. Hence we need to be in place to achieve success (and hope that this approach and the scenarios will when)? What happens to your policy agenda help sort through options and implications in a in the other scenarios? What are the big chal- timely manner. Identifying the desirable policy lenges or opportunities that might arise in responses to diff erent paths for the future of each and how might policies have to change the Internet might well help clarify the relative to accelerate the positive and mitigate the advantages of each policy mix option. negative impacts?

POLICY CHALLENGES (Illustrative) • What early indicators should you be tracking OUTCOMES (THREE DIMENSIONS OF INTERNET CONNECTIVITY) SPHERE Inclusiveness Security Quality so that you know when to review your policies/programs?

International Rather than review the implications of the scenarios from every possible angle, what we propose here are two frameworks to help orga- National nize the answers to both major questions. Th e frameworks are off ered as tools for exploring the implications and potential strategies and actions At the international level, the challenge that these alternative futures may suggest from framework can help illustrate what a mix of the perspectives of diff erent stakeholders. entities and processes—representing governments as well as corporate and global com- In the following pages we apply the frameworks munity stakeholders—may have to tackle. In to present some of the implications of each sce- some cases the scenarios may point to the nario—Fluid Frontiers, Insecure Growth, Short need for an evolution in international coor- of the Promise, and Bursting at the Seams—for dination (maybe even governance) of the both business models and policy challenges. Internet. But in others they could highlight Th ese implication sketches are only meant to questions that would need to be addressed be illustrative and serve as a launching pad for in a broader context—for example, whether exploring what the specifi c implications might international organizations should be man- be for individual industry players, groups of dated to consider global welfare, including stakeholders, or even countries.

34 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

FLUID FRONTIERS

PROVIDER TRANSACTION Devices Software & (PCs, PDAs...) Connectivity Services Content

Buy

Both consumers and New game businesses Premium Subscribe for Service rely largely pockets Wide range Providers as on cloud of options Internet and SaaS but shift for access is (Software consumers bundled with as a Cafeteria Pay Per Use  services Service) (and pockets

BUSINESS MODELS devices?)   Norm is “free” “Free” (funded by advertising)

OUTCOMES (THREE DIMENSIONS OF INTERNET CONNECTIVITY) SPHERE Inclusiveness Security Quality

• The last 2 billion • The global cloud is of • The greatest divide across unconnected people are critical importance and countries is the impact much harder to reach needs to be secured in a of differences in the • Traffic has overwhelmed coordinated way combination of speed and International submarine cables latency that their prevailing but private investors connections offer hesitate to sink money in them

• Some major countries • Massive data generated • Limited recognition of the with low population by Internet users importance of quality has densities and/or remote (including as they kept users in many countries populations have move around while from enjoying the benefits of National POLICY CHALLENGES not yet found a way connected) has many new applications to ensure universal created legal lacunae connectivity regarding ownership of information

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 35 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

INSECURE GROWTH

PROVIDER TRANSACTION Devices Software & (PCs, PDAs...) Connectivity Services Content

Business Low-cost Tiered market premium Buy options (from owned, pockets low-cost, souped-up devices to leased, high- Premium Subscribe end ones) pockets Extensive Niche price consumer segmentation and extensive business  cloud services Pay Per Use  BUSINESS MODELS

“Free” and open source are pervasive “Free” (supported by advertising and/or by volunteers, amateurs, activists)

OUTCOMES (THREE DIMENSIONS OF INTERNET CONNECTIVITY) SPHERE Inclusiveness Security Quality

• Reticence to continue • Instances of strong • Massive divide across relying on U.S.-based government support countries on connection standards and protocols for national champions quality results in global International threatens to create in IT arena create traffic disruption multiple, ill-connected suspicion of their systems motives and goals

• Lack of progress on • Relaxed attitudes toward • Insufficient investment in global standards privacy and information network capacity threatens creates dilemma by sharing, driven by most countries’ Internet use National limiting expansion digital natives, makes it and demands a new public- POLICY CHALLENGES in countries with the difficult to reach policy private bargain greater Internet uptake consensus

36 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

SHORT OF THE PROMISE

PROVIDER TRANSACTION Devices Software & (PCs, PDAs...) Connectivity Services Content

Slow replacement, Buy large secondhand market for devices

Strong price competition; elasticity for Subscribe both consumer connections and for business cloud services

Pay Per Use Low-cost options BUSINESS MODELS

Open- Most is “free” “Free” source (funded by inroads advertising)

OUTCOMES (THREE DIMENSIONS OF INTERNET CONNECTIVITY) SPHERE Inclusiveness Security Quality

• Widespread • Cyber-terrorism grows • Limited by the extensive protectionist mood due to prolonged attempts of governments to slows spread of economic slowdown; control content flowing into International technology and defies their safe heavens elude their countries attempts to breach international action barrier-lowering treaties

• High-functionality • Cyber-protection in • Internal divides as high- devices remain many countries seen quality connections are expensive relative as favoring Internet use not widely available nor to incomes, keeping by the rich in allocating affordable in many countries many countries at low scarce resources that National penetration rates for could go to satisfy more rich Internet use basic needs POLICY CHALLENGES • Protection of national champions or incumbents also keeps costs high

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 37 USING THE SCENARIOS AND EXPLORING THEIR IMPLICATIONS

BURSTING AT THE SEAMS

PROVIDER TRANSACTION Devices Software & (PCs, PDAs...) Connectivity Services Content

Buy Private and/ Emphasis on or gated trustworthy New choices networks for brands include captive, businesses Premium secure devices and top and safe Subscribe consumers become the norm

Pay Per Use BUSINESS MODELS

Large pock- “Free” ets of “free” (advertising)

OUTCOMES (THREE DIMENSIONS OF INTERNET CONNECTIVITY) SPHERE Inclusiveness Security Quality

• Concerted action • Global cyber-criminals • Private, secure global to isolate countries still a step ahead of networks seen as clubs that become safe cyber-Interpol discriminating against some International havens for malicious would-be members, and Internet attacks leaves even serving as geopolitical their populations instruments disconnected

• Large population • Focus on responding • Protective measures segments opting to citizens’ demands becoming a severe constraint out of the Internet for protection while on quality (particularly if minimizing intrusion; National POLICY CHALLENGES they cannot afford the Internet equivalent expensive, secure of airport security networks)

38 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 CONCLUSION Th e Internet of the future will be larger and have a greater impact in society than it does today, as the Internet becomes truly global, spreading beyond large cities in emerging countries into villages and rural areas everywhere, and as Net generations move center stage. But the Internet’s shape 15 years hence and the path it takes to get there are uncertain and unpredict- able. Indeed, the diversity of outcomes across our scenarios highlights how diff erent combinations of change drivers could shape the evolution of the Internet through 2025 in ways that may diff er from the implicit assumptions of its key actors today. Th ese diff erences have important implications for the structure of markets and the emergence of winners and losers across the industry. But the scenarios also unveil insights regarding the Internet’s potential to transform social and human value.

Th e Internet is no longer a world of its own—an autonomous space, separate from the “real” world of bricks and mortar. Th e process of physical, social, commercial, and even psychological convergence will continue to accelerate under any foreseeable future, with wide-ranging implications. Th e Internet and TV are not distinct alternatives any more; telephone and IP networks are not parallel universes; public and private transparency and accountability are not really optional. As fl exible interfaces erode language barriers, the Internet will become comfortably multilingual. Propositions and applications will spread quickly regardless of cultural origin, evolving to address local preferences while also appealing to virtual groups with affi nities not driven by conventional parameters. Th e range of choices and challenges will keep expanding along with the human and social value that this truly global Internet creates.

Th e development of the Internet in the last 15 years has been breathtaking. Its next 15 years could be even more fascinating, as it expands in both depth and breadth and as the range of active stakeholders widens. While the potential challenges are enormous, so are the opportunities. We hope that business leaders will use these scenarios to help make their business models and strategies more nimble and adaptive in the face of an uncertain future. Similarly, we hope that policymakers use these scenarios to explore how the potential of the Internet and broadband can be harnessed to serve broader economic and social objectives. Regardless of how the future unfolds, the Internet will evolve in ways we can only begin to imagine. By allowing ourselves to explore and rehearse divergent and plausible futures for the Internet, not only do we fi nd ourselves more prepared for any future—we can also help shape it for the better.

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 39 ACKNOWLEDGEMENTS

Th is report was written by Enrique Rueda-Sabater, Cisco Systems, and Don Derosby, Jenny Johnston, and Nancy Murphy from Global Business Network, a member of Monitor. Special thanks to John Garrity and Lukasz Maslanka for their excellent support. Th e authors gratefully acknowl- edge the ideas and insights contributed by the experts that were consulted in the early stages of this work (listed in Appendix 1). Further iterations with GBN/Monitor readers Eamonn Kelly, Steve Pickle, Matt Ranen, Peter Schwartz, and Steve Weber added greatly to the quality of the paper.

40 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 APPENDIX 1 INTERVIEWS

Interview Topics

Th e interviews conducted with leaders and experts within Cisco and with external authorities and visionary thinkers covered a wide range of topics pertaining to the Internet’s broader contextual environment, technology and infrastructure, and business models, as shown below.

omic and Social icy, Econ Environ Pol ment ology and Infras Techn tructure

Business Models (Supply Demand Interaction)

Internet Enabled Services Monetization E-commerce Content Content E-finance Pricing VOIP Medical records management Segmentation P2P Remote care Bundling Streaming Remote workers Indirect vs. direct service Text Applications Access models IM Social networking Advertising High Definition Open source innovation(?) Commodification of core Network Build-Out Everything as a service Telco plays and Capacity Cloud computing eTaxation Pace Quality Breadth Functionalities/cost ratios Government investment Device interoperability Private sector investment Enabling Technologies Security protection Wired/fixed mobile/pure wireless mix Batteries Chips Bandwidth efficiency technology Displays Gated internets Storage and compression Demographics Protected cloud “highways Encryption Migration Voice recognition Aging populations Virtual reality Society Youth bulges Fluidity of social values Economics Urbanization Cultural Purchasing power of Policies and Governance sovereignty/exchange emerging middle classes Trade protectionism Culture clashing Productivity enhancement from IT Sheltering “national ICT champions” Digital natives Global spending on ICT Regionalism Digital divides Growthpath disparities General education Cyber terror Value added by “prosumers” Technical IT training Illicit trade/fraud Net neutrality Spectrum allocations/licensing approach IPv6 Internet of things standard

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 41 INTERVIEWS

Cisco Interviews

Within Cisco we interviewed senior executives as well as individuals with deep expertise in areas ranging from markets to technology, in both headquarters and in the fi eld.

Pramod Badjate Pankaj Gupta

Osvaldo Bianchi Maxim Kalmykov

Oren Binder Julian Lighton

Michael Bloom Mohsen Moazami

Jane Butler Robert Pepper

Howard Charney Scott Puopolo

Fernando Gil De Bernabe Arielle Sumits

Jaak Defour Stuart Taylor

Bob Friday Kaan Terzioglu

Tom Goerke Paul Th ienprasit

Kate Griff en Ted Tsortos

We also took into account the extensive analyses behind Cisco’s Visual Networking Index and the predictions of Cisco technology futurist David Evans.

42 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 INTERVIEWS

Thought Leaders Interviews

To complement the Cisco perspectives, we also engaged an eclectic group of leading global thinkers:

Chris Anderson Editor-in-chief, Wired mag- Eamonn Kelly Monitor partner specializing azine, previously with Th e Economist, Science in mastering uncertainty; former GBN presi- and Nature; author, Th e Long Tail and Free! dent and strategy director, Scottish Enterprise; author, Powerful Times: Rising to the Challenge Stewart Brand Cofounder of GBN, the Long of Our Uncertain World. Now Foundation, Th e WELL, the Whole Earth Catalog; author of four books including Whole David Post Law professor (intellectual prop- Earth Discipline and Th e Media Lab. erty), Temple University; fellow, the Institute for Information Law and Policy, New York Law Esther Dyson Venture capitalist; cosmonaut- School; author, In Search of Jeff erson’s Moose— in-training; emerging technology evangelist and Notes on the State of Cyberspace. founding publisher/editor, Release 1.0; former chair, ICANN; technology columnist and blog- Peter Schwartz GBN cofounder and Monitor ger, and author, Release 2.0. partner; former head of scenario planning, Royal Dutch Shell; author of fi ve books including Th e Jim Forster Silicon Valley veteran; 20 years Art of the Long View and Inevitable Surprises. and a Distinguished Engineer at Cisco; now engaged in non- and for-profi t eff orts to extend Steve Weber Political scientist specializing in the Internet globally, including Esoko Networks international and national political economy (Ghana) and ApnaNet (India). and security; professor and director, Institute of International Studies, U.C. Berkeley; author, Th e John Hiles Research professor, computer Success of Open Source sciences department, U.S. Naval Post Gradu- ate School; development director, “Sim” game We are also grateful to two groups that provided on health. a valuable sounding board at an early stage of our work: experts from the ICT Policy Unit at Mimi Ito Cultural anthropologist, Keio Univer- the World Bank and international economists sity and University of California; researcher on at the Center for Global Development. portable technologies and new media, especially among youth; co-author, Personal, Portable, Pedestrian: Mobile Phones in Japanese Life.

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 43 APPENDIX 2 AXES OF UNCERTAINTY AND DRIVERS OF CHANGE

Axes of Uncertainty

We identifi ed three axes of uncertainty, below, that formed the scaff olding for constructing scenarios on the future of the Internet. Th ese were synthesized from a set of 14 key change drivers that we prioritized based on our research. Th ese drivers are woven through the scenarios in diff erent combinations to create challenging, yet plausible futures.

LIMITED NETWORK BUILD-OUT EXTENSIVE

INCREMENTAL TECHNOLOGICAL PROGRESS BREAKTHROUGHS

CONSTRAINED USER BEHAVIOR UNBRIDLED

44 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 AXES OF UNCERTAINTY AND DRIVERS OF CHANGE

Drivers of Change

Th e 14 drivers of change and the range of outcomes we envisage for each are described below. Th ese drivers are grouped under the axis with which they are most closely associated.

NETWORK BUILD-OUT

Laissez Broadband as Are governments likely to actively seed or Faire GOVT. (INVESTMENT) ACTIVISM Basic Infrastructure gap-fill network investments?

Regulate Will policies, and the resulting incentives for Existing Assets NETWORK ACCESS Focus on Entry private investment, focus on access to existing networks or promoting their expansion?

Status Quo Dynamic Licensing Will licensing and spectrum allocation LICENSE/SPECTRUM ALLOCATION evolve into a more dynamic approach?

How widespread will be government CONTENT CONTROL Widespread Infrequent interventions to control content?

Will the protection of national ICT companies Commonplace PROTECTIONISM/NATIONAL IT CHAMPIONS Select Instances from external competition be significant?

Fragmentation STANDARDS Harmonization Will global Internet standards converge and consolidate?

TECHNOLOGICAL PROGRESS

Will the production costs (and prices) of Stagnant or Rapid Drop Internet-related hardware, including smart Marginal Drop PRODUCTION COSTS phones and new connection devices, fall rapidly vis-a-vis purchasing power?

Will rapid technology breakthroughs In Very Few TECHNOLOGY BREAKTHROUGHS In all Technologies continue to happen across network-related Technologies and interface technologies?

Will the Internet move significantly beyond Phones and relying on handheld devices and computer DEVICE CONNECTIONS Internet of Computers Things Plus terminals towards a more massively integrated web of things?

THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025 45 AXES OF UNCERTAINTY AND DRIVERS OF CHANGE

USER BEHAVIOR

Curtail Always on/ Will the trade-offs around privacy be Ubiquitous PRIVACY CHOICES Everything Viewable resolved in ways that curtail connectivity? Connectivity

How different will the learning and social A Mirage GENERATIONAL GAPS A Game Changer behavior of the Net generations turn out to be from older generations?

Spending Growing Percent Will consumers keep expanding the portion Slows down ICT EXPENDITURE (INCL. DEVICES) of Income of disposable income they allocate to ICT (products and services)? Full with Will services and software keep moving Setbacks MIGRATION TO CLOUD Few Concerns steadily and massively to the cloud?

Will there be continuously rapid demand growth Price Elastic RICH CONTENT Exponential Growth for rich content or will consumption suddenly respond to changes in bandwidth pricing?

46 THE EVOLVING INTERNET DRIVING FORCES, UNCERTAINTIES, AND FOUR SCENARIOS TO 2025

For more information, please contact: Nancy Murphy Monitor/GBN 101 Market Street Suite 1000 San Francisco, CA 94105 [email protected]