OECD DIGITAL ECONOMY PAPERS No. 257 ECONOMIC AND SOCIAL BENEFITS OF INTERNET OPENNESS 2016 MINISTERIAL MEETING ON THE DIGITAL ECONOMY BACKGROUND REPORT ECONOMIC AND SOCIAL BENEFITS OF INTERNET OPENNESS FOREWORD This report provides the backdrop for the discussion in Panel 1.1 “Economic and Social Benefits of Internet Openness” of the OECD Ministerial Meeting on the Digital Economy, 21-23 June 2016, Cancún (Mexico). It presents a framework for understanding and analysing Internet openness, the factors that influence it, and its effects. It also presents initial qualitative and quantitative evidence on the effects of Internet openness on trade, innovation and entrepreneurship, and macroeconomic performance, and social wellbeing. The report was prepared by Sarah Box and Jeremy West, OECD, for the Committee on Digital Economy Policy (CDEP) with contributions from Geoff Huston*, Emily Taylor, Christopher Kuner, Tim Denton, Fabien Curto Millet of Google, Usman Ahmed of PayPal, and Eric Jardine of the Centre for International Governance Innovation (CIGI). The report was approved and declassified by the Committee on Digital Economy Policies (CDEP) on 30 May 2016 and prepared for publication by the OECD Secretariat. * Mr Huston has revised and consolidated the essays he wrote for the OECD into one longer piece, which is available at www.potaroo.net/ispcol/2015-10/open.pdf. Note to Delegations: This document is also available on OLIS under reference code: DSTI/ICCP/(2015)17/FINAL This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 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All requests for commercial use and translation rights should be submitted to [email protected]. 2 OECD DIGITAL ECONOMY POLICY PAPER ECONOMIC AND SOCIAL BENEFITS OF INTERNET OPENNESS TABLE OF CONTENTS FOREWORD ................................................................................................................................................... 2 EXECUTIVE SUMMARY ............................................................................................................................. 5 OVERVIEW .................................................................................................................................................... 8 1. INTERNET OPENNESS: DEFINITION AND SHAPING FORCES ...................................................... 15 1.1 What does Internet “openness” mean? ................................................................................................ 15 1.1.1 Open versus openness ................................................................................................................... 15 1.1.2 Openness at a glance ..................................................................................................................... 17 1.2 What are the benefits of Internet openness? ........................................................................................ 18 1.2.1 Economic benefits of Internet openness in international trade ..................................................... 18 1.2.2 Innovation and entrepreneurship ................................................................................................... 19 1.2.3 Macroeconomic performance ........................................................................................................ 21 1.2.4 Social wellbeing ............................................................................................................................ 22 1.2.5 The challenges of Internet openness ............................................................................................. 23 1.3 What factors are affecting the Internet’s openness? ............................................................................ 24 1.3.1 Framework for analysis ................................................................................................................. 25 1.3.2 Stakeholder objectives that affect openness .................................................................................. 26 1.3.3 The objectives are driving actions and conditions that affect openness ........................................ 27 2. TOWARDS MEASURING THE BENEFITS OF INTERNET OPENNESS .......................................... 33 2.1 Introduction .......................................................................................................................................... 33 2.2 Benefits of Internet openness for trade ................................................................................................ 35 2.2.1 The Internet and trade ................................................................................................................... 35 2.2.2 Internet openness and trade ........................................................................................................... 36 2.3 Benefits of Internet openness for innovation and entrepreneurship ..................................................... 42 2.4 Macro-economic benefits of Internet openness ................................................................................... 44 2.5 Social benefits of Internet openness .................................................................................................... 46 2.5.1 Improved medical research and healthcare ................................................................................... 47 2.5.2 Greater Educational Opportunities: MOOCs ................................................................................ 48 2.5.3 A platform for greater self-expression .......................................................................................... 49 NOTES .......................................................................................................................................................... 50 REFERENCES .............................................................................................................................................. 52 ANNEX A: RECOMMENDATION OF THE OECD COUNCIL ON PRINCIPLES FOR INTERNET POLICY MAKING ....................................................................................................................................... 62 ANNEX B: ELEMENTS OF INTERNET OPENNESS ............................................................................... 64 B.1 Technical openness ............................................................................................................................. 64 B.2 Economic openness ............................................................................................................................. 65 B.3 Social openness ................................................................................................................................... 66 B.4 Other facets of openness ..................................................................................................................... 67 ANNEX C: ADDITIONAL ACTIONS AND CONDITIONS THAT AFFECT OPENNESS ..................... 69 C.1 The slow transition from IPv4 to IPv6 ................................................................................................ 69 C.2 International law enforcement co-operation ........................................................................................ 69 C.3 The lack of international legal procedural interoperability among laws concerning the Internet ....... 70 OECD DIGITAL ECONOMY POLICY PAPER 3 ECONOMIC AND SOCIAL BENEFITS OF INTERNET OPENNESS C.4 Competitive markets ........................................................................................................................... 71 C.5 Traffic management and net neutrality ............................................................................................... 72 C.6 Fragmentation of technical standards versus technical interoperability .............................................. 75 C.7 Mass data collection and analysis by the private sector ...................................................................... 76 C.8 Summary – the impact on Internet openness ....................................................................................... 76 ANNEX D: GLOBAL DATA FLOWS – A MEASUREMENT CHALLENGE FOR STUDIES OF INTERNET OPENNESS .............................................................................................................................. 78 D.1 The interlinked world – building a new snapshot of data flows ......................................................... 79 D.2 Insights from information on Google searches ................................................................................... 82 D.3 Insights from information on YouTube watch hours .......................................................................... 85 D.4 From description to