Data-driven digital economy is surging as estimates show that global internet protocol (IP) traffic – a proxy for data flows – will more than triple between 2017 and 2022, according to the latest UNCTAD Digital Economy Report 2021.
The COVID-19 pandemic has markedly increased internet traffic, as many activities have moved online. According to the report, global internet bandwidth rose by 35% in 2020, compared with 26% the previous year. A growing part of data flows is related to mobile networks, the report indicates.
With the increasing number of mobile devices and internet-connected devices, data traffic by mobile broadband is expected to account for almost one third of the total data volume in 2026, the report states.
Despite the massive growth, UNCTAD’s Director of Technology and Logistics, Shamika N. Sirimanne, highlighted that “the data-driven digital economy is characterized by large imbalances and divides” that “is compounding the digital divide”.
Developing countries in subordinate positions
The report warns that developing countries risk becoming mere providers of raw data to global digital platforms, while having to pay for the digital intelligence obtained from their data.
Only 20% of people in least developed countries (LDCs) use the internet, and when they do, it’s typically at relatively low download speeds and with a relatively high price tag attached, the report states.
The Digital Economy report reveals that the average mobile broadband speed is about three times higher in developed countries than in LDCs. And while up to 8 out of 10 internet users shop online in several developed countries, only less than 1 out of 10 do so in many LDCs.
Interestingly, the report indicates that international bandwidth use is geographically concentrated along two main routes: North America – Europe and North America – China.
Digital giants reinforce their dominance
The largest digital platforms – Apple, Microsoft, Amazon, Alphabet (Google), Facebook, Tencent and Alibaba – are increasingly investing in all parts of the global data value chain, the report indicates.
The sizes, profits, market values and dominant positions of the platforms have further strengthened during the pandemic as digitalization has accelerated. According to the report, Amazon has invested some $10 billion in satellite broadband. Amazon, Apple, Facebook, Google and Microsoft were the top acquirers of AI start-ups between 2016 and 2020.
Four major platforms (Alibaba, Amazon, Google and Microsoft) accounted for 67% of global cloud infrastructure services’ revenues in the last quarter of 2020. UNCTAD stated that by 2022, the share of global digital advertising spending by five major digital platforms – Alibaba, Amazon, Facebook, Google and Tencent – is expected to exceed 73%, up from 50% in 2015.
New global data governance approach needed
As cross-border data flows become increasingly prominent in the digital economy, UNCTAD has called for a new approach to properly regulate them at the international level.
“A new international system to regulate data flows is needed so that associated benefits can be more equitably distributed” .
Sirimanne
The UNCTAD’s Director of Technology and Logistics, Sirimanne, urged the world to pay adequate attention to the current divides that characterize the global digital economy not only between countries, but also between states and enterprises.
According to the report, less-developed countries also suffer from losing their top talent to developed countries and have smaller representation in setting up the global policy discussion – contributing further to the growing global inequality.
While all countries will need to allocate more domestic resources to the development of their capacities to create and capture the value of data domestically, the report argued that many developing countries may need international support due to their limited financial, technical and other resources.
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