Speech by Malcolm Johnson, ITU Deputy Secretary-General

The stakes at play in the global digital economy

20 January 2016, London, United Kingdom

It is a great pleasure to be here with you this afternoon to celebrate 115 years of the Commonwealth Telecommunications Organization – and I would like to say how much we appreciate the close and excellent relation ITU enjoys with the CTO.

Last year, ITU celebrated its 150^th anniversary – and many of you were present with us during the course of those celebrations. So like CTO we understand the importance of these occasions – not just to mark the achievements of venerable institutions like ours, but also to pause and reflect, and set new goals to evolve with the times.

Ladies and gentlemen,

I have been asked to speak today on 'The Stakes at Play in the Global Digital Economy', a very topical issue at the moment.

Today, we seem to be at a crossroads in the global economy, with an uncertain outlook ahead. US equity markets flat-lined over 2015, while the Chinese market took a steep fall. The Economist noted just last week that here in the UK the stock market is still some way below its level not just a year ago but at the beginning of the millennium.

And yesterday, the IMF cut its growth forecasts for the next two years, warning that recovery from the financial crisis could be derailed altogether if key challenges are mishandled.

Earlier this week, Guy Ryder, the Director-General of the International Labour Organization, highlighted the fact that the expansion of the world economy has been too weak to close the significant employment and social gaps that have emerged since the beginning of the global crisis in 2008.

Ladies and gentlemen,

Last week, the World Bank estimated that the 'digital economy' now accounts for around 4-5% of GDP and 1-2% of jobs. It may sound like a relatively small proportion, but it is important for a number of reasons.

Firstly, we have seen that the digital economy can buck the trend. During 2015, the increased stock market valuations and growth of the so-called 'FANGS' — Facebook, Amazon, Netflix and Google – was incredible.  Stocks of Amazon and Netflix both more than doubled, while Alphabet (the Google holding company) and Facebook also enjoyed a great year.

And secondly, as is widely recognized, the digital sector is very important strategically to the economy.

The digital sector offers cost-cutting efficiency gains across many sectors, including healthcare and education, and it also offers entirely new smart ways of doing business – from outsourcing, crowdsourcing, crowdfunding and crowdworking, to more mainstream flexible working methods.

Distinguished colleagues,

The digital economy is one of the key focuses of the World Economic Forum (WEF) taking place in Davos this week, where world leaders will be debating 'the Fourth Industrial Revolution or the Machine Age'.

Tomorrow in Davos, ITU is convening a Special Session of the UN Broadband Commission for Sustainable Development to hear and learn directly from industry players how they are coping with the current environment.

One of the things at stake may be the very nature of the telecommunications company. In the digital economy, telecom companies face massive technological upheaval, and at the same time the emergence of agile new competitors, subject to completely different regulatory and tax regimes.

Telecom companies are having to transform themselves from 'nuts and bolts' network engineering companies to service providers or even software companies, building virtual as well as real networks, and developing new customer relationships.

At the same time, fixed line providers are having to invest in commercial relationships with giant multinationals – companies that might be built around a search algorithm or other innovative piece of software; whose revenues may derive from advertising; and which may not even have to apply for a government license to operate in any particular jurisdiction.

Five years ago, there was a lot of discussion about whether telcos needed to compete or collaborate with the over-the-top players, the OTTs, but today partnership seems to be increasingly recognized as the way forward.

Ladies and gentlemen,

Another big question and issue at stake in the global digital economy is whether it will result in a net gain or net loss, in terms of jobs?

This has been a month of major report launches, including the World Bank's 'World Development Report' last week, and the 25^th edition of UNDP's 'Human Development Report'.

To paraphrase their conclusions, 'there has never been a worse time to be a manual worker, or a better time to be a knowledge worker'.

Yesterday the WEF predicted that as many as 7.1m jobs could be lost to robots in the near future, with office and administrative jobs facing the largest decline, falling by 5pc between now and 2020

Perhaps it is too early to say whether jobs will increase or decrease overall, but it is clear that globalization, and the digital revolution, are leading to a redistribution of jobs globally – and that economic influence is shifting eastwards.

One of the insights offered by the World Bank report was that the introduction of digital technologies is amplifying existing trends – expanding productivity where good institutions and ICT skills exist - what in ITU would be called an effective 'enabling environment'.

But on the other hand, where there are weak institutions or a poor regulatory environment, digital technologies act to amplify the downside risks.

It is also clear therefore that renewed focus and energy needs to be directed at building digital competencies, as well as increasing flexibility in terms of work practices.

This is the reasons ITU holds its annual Global Symposium for Regulators – and many other capacity building events around the world, some I am pleased to say jointly with CTO, to enable a cross fertilization of best practices and encourage the building of effective enabling environments that make the most of the digital economy.

ITU is also continually advocating the tremendous benefits to be had from information and communication technologies, ICTs.

We did this most recently at the COP21 Climate Change Conference in Paris, emphasizing the significant reduction in total greenhouse gas emissions achievable through the application of smart technologies, especially in cities; and at the UN General Assembly review of the WSIS – the World Summit on Information Society - where we emphasized that ICTs will be essential for the implementation of each of the 17 new UN Sustainable Development Goals. In partnership with GeSI a new report will be launched at the next WSIS Forum, hosted by ITU in Geneva in May, addressing how ICTs can best be used to implement each SDG. This will be a major objective of ITU's work over the next fifteen years.

The CTO has common objectives and a largely common membership with ITU, so let me conclude by saying how much we look forward to working together with CTO to help achieve the SDGs, and bring the benefits of the information society to all the world's people.

Congratulations again to CTO, and I wish you a very enjoyable and successful anniversary year!

Thank you for your attention.