The Internet economy is projected to reach $4.2 trillion by 2016. According to Andrew Nusca of Smart Planet, if it were an economy of a nation, it would be ahead of Germany, and just behind the U.S., China, India, and Japan. According to McKinsey Global Institute, as a dedicated industry, the Internet would outperform agriculture and utilities. On average, it contributes nearly 4% to GDP in the 13 countries covered by their research (image below) — an amount the size of Spain or Canada in terms of GDP, and growing at a faster rate than that of Brazil.
My question is, why isn’t our government doing more to foster online ventures and tech start-ups? Similar to the highway investment FDR made back in his days. The numbers to sustain such initiatives speak for themselves:
- In 2010, the value of online retail was $252 billion (BCC)
- The added value of ROPO (research online, purchase offline) contributed $482 billion
As a ‘best practice’ example, let’s look at South Korea. The country boasts the fastest, most reliable internet access (the U.S. is #26). Research shows that doubling the broadband speed increases GDP by 0.3%. A 1000 times increase in broadband speed could mean a 3.0% boost in GDP.
If the U.S. were to build out 1 gigabit per second Internet, there should be a one-time boost of about 2.5% in GDP. This would mean an additional $375 billion each year and increasing with further GDP growth.
Today, the U.S. has an average broadband speed of about 4-5 mbps and in 2009, the FCC’s National Broadband plan claimed it would cost about $350 billion to fully upgrade America’s infrastructure. By comparison, South Korea, a country of 48 million people, spent $24 billion to rollout gigabit per second Internet that is scheduled to wrap up this year.