The economic impacts of the Internet - Research Paper Example

?Running Head: THE ECONOMIC IMPACTS OF THE INTERNET The Economic Impacts of The Internet It is a known factthat innovations of any kind are made with the view of progressing mankind in any way possible. It is man’s inquisitive nature along with man’s need for a better future and more convenient lifestyle that paves the way for innovations in every field. It has been seen that innovations have a two way relationship with the economy of a nation. Innovations contribute towards high level of productivity and growth which leads to economic growth. On the other hand economic activities of a country contribute towards innovative activities. In any competitive market, innovations and technological developments are important for economic growth (Cainelli et al, 2004, p.1). Any discussions regarding inventions that have changed the world will doubtless revolve around an analysis and review of such important tools such as the traditional landline telephone, the internal combustion engine, or even the gun. However, it is hard to think of a single invention that has more profoundly affected the way that our current life is led, subjects are studied, work is performed, leisure time is passed, and communications are transmitted than that of the Internet. This paper explores on the economic impacts of The Internet. Whereas each of the previous inventions that have been listed have helped to define the way that the 20th and 21st centuries have developed, it is exceedingly hard to argue that any one invention has changed the way in which life exists more than that of the Internet. Due to the fact that the Internet allows a level of communication and information distribution across such a wide range of topics, one can view it in an entirely different way from the other tools that have thus far been listed. Regardless of the level of utilization that can be had from any range of inventions that such an study could reveal, the revolution that the Internet has provided spans across nearly each and every layer of available knowledge and information that one can hope to engage with. For this reason, understanding, appreciating, and analyzing the unique ways that The Internet has fundamentally reshaped our world will be the subject matter of this paper. Literature review The concept of computer networking was first launched in the late 1950s. The event that led to the need of a decentralized computer network was Soviet Union’s launch of Sputnik during the Cold war. It was the first artificial satellite. In order to compete with Soviet Science, the US Congress established the ARPA (Advanced Research Project Agency). It was “equipped with generous funds and a mandate to explore cutting-edge science and technology, and was to play a key role in the Internet’s development.” (History of Computers and the Internet, n.d., p.45) With the growing tension of the Cold War the computer system as storage of commands and controls was no more reliable because of its centralized design. The Rand Corporation developed a new networking technology called packet-switching for creating decentralized network, one that can survive even if a portion of it is destroyed by the enemy. This concept means messages are divided into packets which are small sized units. These packets contain all the information about the data and can reach their destinations by traveling more than one path. In 1968, a small scale ARPANET network was created by Bolt, Beranak and Newman. Initially ARPANET created connection between only four computers situated in California and Utah. During that time, there were only 20 users. Today the Internet is used by millions all over the world (History of Computers and the Internet, n.d., pp.45-46). From ARPANET came the Internet protocol (IP) which allows messages to be transmitted by routers. Routers are “computer nodes acting as mail sorters.” The IP address decides the best path for a package to travel towards its destination. Later on domain names were introduced which have alphabetical codes to help human memory to retain the domain address. Currently there are various addressing systems for the World Wide Web like .gov, .edu, .com, .org, .mil, .net etc. Then there are also two digit country codes like .us (United States), .ca (Canada), .in (India) etc. The next half of The Internet comminucation is TCP/IP (Transmission Control Protocol). It breaks the messages in packages and sends them to their destination where they are again assembled so that the original message can be read (Keefer & Baiget, n.d., pp.91-92). In the initial decades The Internet with high speed connections were more popular in governments, institutions and businesses because only these bodies could economically afford the connections. It was the introduction of World Wide Web (www) in 1993 that made The Internet popular in the households of North America. In the beginning only 56kbps modems were available that were economically viable for the common people. These modems were supported by public telephone lines. In the last decade broadband products and services were introduced which made more bandwidth and connection system affordable for the North American common people. The technology of the regular telephone which transmits sound from one part of the globe to the other part now covers modems, sound cards, speaker phones and voicemail among others. All these involve computer and the Internet. Another technology which is Voice over The Internet Protocol (VoIP) is a technology which transmits digital data through the Internet instead of analog phone lines. With this technology it became possible for people to establish communication to far away countries without having to worry about paying exorbitant international phone charges (The Internet History From ARPANET to Broadband, 2007, pp.37-38). The high speed The Internet technology is referred to as ‘broadband’ and is available all over the United States. It is important for businesses and its ubiquity can contribute towards local economic development. The economic impact is stronger in areas which are dependent on information technologies and have low population densities (Kolko, 2010, p.2). In current years the Web is going through a revolution. Most webs, blogs and information based sites are being metered to restrict entrance in order to earn revenue. The free access of web is slowly becoming a myth even if it will turn out to be progressive or regressive (Socolow, 2013, p.B4). The Internet has become a way to stay connected with friends, acquaintances and relatives. Even people can interact with strangers for questions or help. The social websites like Facebook, Twitter have increasing become popular because of three reasons – popularity of broadband, mobile connectivity among most people and growing demand of social networks (Rainie & Wellman, 2012, p.24). A study was conducted on 1380 high school students in Turkey to explore The Internet abuse among teenagers. This is because adolescents adapt to digital technologies faster than any other age group, and the study showed that The Internet usage is most common among 16-24 age group in Turkey. Adolescent phase in known for being psychologically sensitive, and if this is combined with intense use of digital technologies then teenagers can become vulnerable to The Internet abuse. The most common symptoms are “excessive use, tolerance, preoccupation with the Internet, and using the Internet to escape from disturbed feelings.” (Gencer & Koc, 2012, p.25) Till a decade back broadband services in the U.S. did not live up to its expectations. Excite@Home was a company that attempted to become the leading broadband service provider to the cable TV companies became bankrupt, and this reflect low demand rise of The Internet services. All new technologies go through the hurdles of high cost and uncertainty value. American households needed to make big investments for broadband service. From 1998 to 2001, an estimated $46 billion was spent by 10 largest cable companies to convert “one-way TV systems into two-way broadband.” Even phone companies had to upgrade their copper lines for The Internet service. Although broadband services allowed fast downloads, many multimedia services and The Internet appliances were not available (Samuelson, 2001). The article “Long live the web” discusses about the benefits of The Internet services and the need to protect it for digital revolution, prosperity and freedom. The history of the world wide web has been described and also the current threats to its original principles like easy accessibility to websites. The article focuses on the need for universality, decentralization and free access to web technologies by companies and individuals (Berners-Lee, 2010, p.80). Research question There is great impact of technologies based on The Internet on the business and economy of any nation. Since the invention of the Internet almost four decades ago, it has been a constant source of all kinds of information ranging from entertainment, news, financial and academic. It has helped in creating and maintaining close bonds between both friends and strangers from different corners of the world through email services, instant messaging, video conferencing and social networking. The Internet has also provided the facility of online shopping that enables customers to buy the desired products and services by a mere click of the mouse. Manufacturers can also get information regarding market demand trends from the Internet. Online tools that guide in productivity and communications are extremely beneficial to government and other enterprises. The Internet has helped the government to more efficiently assess the needs of the public and thus can provide improved delivery of services (Nottebohm et al, 2012, p.1). The impact of The Internet on business and economy of a nation will depend on the extent of The Internet usage in various companies and organizations. Since The Internet is still developing, its impact on productivity is still a matter of research. In the beginning of this century, various experts assembled together to analyze the growth of production level in companies and organizations that were using the Internet most intensively. With the growing popularity of the Internet among other companies and organizations, study was also done to estimate the effect of the Internet on the productivity in the next five years. It was estimated that The Internet would contribute towards a 0.25-0.50 percent growth in productivity in the United States in the next five years. The benefits of the Internet arise out of its faster and cheaper information technology. Such technologies are needed in any kind of business to keep track of employees, suppliers and customers. Business sectors that are information based like financial and health services can reduce their transaction costs drastically. The Internet also helps to effectively manage supply chains, inventory levels, also helps to maintain sound collaboration between business partners. The Internet has a great impact on the global economy as it paves the way for markets to become more easily accessible to buyers and sellers all over the world. To get the full benefits of the Internet it is necessary to bring the nonusers like the older population, the poor and the uneducated into the sphere of The Internet usage. This will require a sustained and imaginative effort and may not be fully applicable in a single generation (Litan & Rivlin, 2001, pp.3-6). This paper focuses on the research question What are the economic impacts of the Internet? For this purpose various articles and books have been used. The history of the Internet has been studied along with its growth and impact on the business and economic sectors of nations. The Internet is still developing and its usage has numerous benefits on business activities. It helps in productivity growth which increases the profit margin. The Internet’s easy, fast and economically viable communication system helps in broadening the market for both buyers and sellers. Theoretical Framework One does not need to look very hard to find ways in which the Internet has been, and continues to be, beneficial to those around the world. For this purpose, the research proposal has considered the work of Dennis Brown in his article “Broadband The Internet’s Value for Rural America”. Though the piece itself is somewhat dated (2010), it helps to engage the reader with the necessary questions of how and why the Internet serves as a vital component of business and everyday life in issues and within matters that many would not automatically assume bear any particular correlation to the use of the Internet. Seeking to understand each of these and place a value behind the benefits that the Internet can bring to both rural and developed populations is an integral component of just how useful such an organism as the Internet can be with regards to growth, development, education, and information acquisition of nearly each and every variety. It was seen that in 2008, 55 percent of adults in the U.S. had The Internet access at home while in rural areas only 41 percent adults had The Internet access at home. This discrepancy was because of high costs and low returns of broadband investments. Studies have proved that rural economy benefits greatly from The Internet accessibility. A comparison was done between countries that had The Internet facilities from as early as the year 2000 and countries that had little or no access to the Internet in 2000. It was observed that the first group of countries had greater productivity growth and larger nonfarm private earnings than the second group of countries. Telemedicine and telehealth are important for health care facilities in the rural sectors. Enhanced accessibility of “health information, products, and services confer real economic benefits on rural communities: reducing transportation time and expenses, treating emergencies more effectively, reducing time missed at work, increasing local lab and pharmacy work, and generating savings for health facilities from outsourcing specialized medical procedures.” (Stenberg et al, 2010, p.1) In the last few decades employment growth in the U.S. has been mostly seen in service sectors and these sectors are more suitable for The Internet applications. Equal access of the Internet and the Broadband is still questionable in rural and urban communities (Stenberg et al, 2010, p.1). Quantitive Research The broadband’s economic impact can be reflected by several effects. A firm gets benefited by the use of broadband as it leads to a “multifactor productivity gain.” (Katz, 2012[a], p.3) This helps in increasing the GDP (gross domestic product) of a country. Likewise, usage of broadband in the households also helps in increasing the real income level of households as a “function of a multiplier.” All these contribute towards GDP growth. However, there is an additional advantage for residential users in terms of consumer surplus. For example, the difference between how much the consumer is agreeable to pay for the broadband service and the actual price of the service. Although this is an abstract value and does not contribute towards GDP, it reflects the advantages of The Internet as source of all kinds of news and information (Katz, 2012[a], p.3). In 2009, United States launched the broadband stimulus program worth USD 7.2 billion to provide The Internet services to unserved and underserved areas (Katz, 2012[a], p.19). The employment effect of the program over 4 years from 2009 to 2012 has been displayed in Table 1. Sectors Jobs created Direct employment Electronic equipment 4,242 Constructions 26,218 Communications 6,823 Subtotal 37,283 Indirect employment Distribution 9,167 Other market/non-market services 8,841 Transportation 1,536 Electronic engineering 959 Metal products 1,839 Other 8,704 Subtotal 31,046 Total Type 1 employment 68,329 Induced effect 59,500 The employment effect over the 4 years was creation of 127,800 jobs after combining the direct, indirect and induced jobs. Employment enhancement per year was 31,950. A study conducted on national level in the U.S. found that nationwide The Internet application can increase economic growth by $460 billion annually. In 2003, Accenture estimated that The Internet can add $ 500 billion to the country’s GDP. Another study estimated that every percentage point increase in broadband use in a specific area can increase employment from 0.2% to 0.3% annually (The Economic Impact of Broadband, 2009, p.2) Qualitative Research A nationwide use of the Internet has its positive impact on the economy of a nation, and this has been evident in the past decade. However, “real growth in bandwidth-intensive Web content, rich media, and Web and IP-based applications” is still is developing stage. The growing dependence of businesses on online facilities, and increasing consumer entertainment like games and movies can put pressure on the middle mile of the Internet which is the time taken by data to move across the Internet. The solution is a “highly distributed approach to content delivery.” (Leighton, 2009, p.51) Studies have shown that access to broadband services have positive impacts on the economic growth and performance. Moreover, the impact value is real and measurable (Gillett, 2006, p.3). It has also been seen that regions which are already economically developed are not much benefited by the broadband services. Impact of broadband is greater in economically weaker regions where availability of The Internet is low because of rural communities (Gillett, 2006, p.36). Discussion This paper has used research materials to discuss the economic impacts of the Internet and broadband services. The impact of the Internet on teenagers has also been explored. Excessive use of The Internet and using it for the purpose of staying away from negative emotions pave the way for The Internet abuse among the adolescents. Through a review of the extant research, it is the understanding of this researcher that there has been a true glut of information researched pertaining to the Internet and its effect on society, culture and inter-cultural relations. All of these cultural and societal interpretations of how the Internet affects the ways that humans interact with one another, their own governments, and the way in which relationships subsequently develop is no doubt important; however, for purposes of the literature review that has been performed, it has become evident that they are somewhat overdone. Furthermore, a great deal of available research has discussed the fact that the Internet provides a powerful and facile tool in which regions, and nations can ultimately compete within the field of global economics. Whereas many players had previously been locked out of such matters, the Internet has provided the means of commerce and communication that otherwise would not have existed. Even a decade back the demand of The Internet did not grow steadily and this resulted in bankruptcy of a broadband service provider. With various quantitive and qualitative research methods, the positive economic impacts of The Internet on the U.S. have been studied. It has also been concluded that the impact value of the Internet is real and measurable. Conclusion Since the advent of the Internet, governments have realised the potential of its services on the business economic and communities. Broadband is already considered as an important tool for global information structure, providing easy and fast access to The Internet-based services, content and applications to businesses, students and consumers. It is the proposal of this researcher that the focus of further research on the topic should be concentric around measurable economic factors that can shed a light on the numerical degree or percentage rate of growth/change that could be measured within a given economic system as the result of the injection of the Internet. As a result of the fact that almost every world economic system has long since been digitalized and introduced to the Internet, the ultimate goal would be to seek to find a level of influence that the Internet has had upon the system and correlate this to a further increase that The Internet usage within the society or economic system might hope to confer upon the system as a whole. References Berners-Lee, T. (2010). Long Live The Web. Scientific American, 303(6), 80-85 The history of the world wide web has been explored. This articles also discusses about the importance of digital revolution and liberty, and the need to protect them. In current times the founding principles like free access to web technologies from anywhere in the world are being hindered. Cainelli, G., Evangelista, R. & M. Savona (2004). The Impact of Innovation on economic performance in services. The Service Industry Journal, 24(1), 1-11 This article discusses about the two-way relation between innovation and economic structure in services of business firms. While innovation can pave the way for enhanced production and economic growth, similarly high level of productivity can boost innovation. Gencer, S. L., & Koc, M. (2012). The Internet Abuse among Teenagers and Its Relations to The Internet Usage Patterns and demographics. Educational Technology & Society, 15(2), 25–36 This article is based on a study conducted in Turkey to explore the growing The Internet abuse among teenagers because of excessive use of the Internet. Adolescent stage is emotionally sensitive, and added to that using The Internet to escape negative emotions and remaining preoccupied with the Internet can cause disturbing patterns in the behaviors of the adolescents. Gillett, S.E. (2006). Measuring Broadband’s Economic Impact, MIT, accessed on April 5, 2013 from: http://cfp.mit.edu/publications/CFP_Papers/Measuring_bb_econ_impact-final.pdf History of Computers and the Internet (n.d.) accessed on April 4, 2013 from: http://vig.prenhall.com/samplechapter/0130898155.pdf The Internet History From ARPANET to Broadband (2007). Congressional Digest, 86(2), 35-64 This article explores the history of the Internet which originated from a government sponsored research program called APRANET. Initially, it had the sole purpose of connecting scientists and researchers in any part of the world. Later, APRANET was joined with a separate project to strengthen the telecommunications network of the U.S. Katz, R. (2012[a]) Impact of Broadband on the Economy, ITU, accessed on April 5, 2013 from: http://www.itu.int/ITU-D/treg/broadband/ITU-BB-Reports_Impact-of-Broadband-on-the-Economy.pdf Keefer, A. & T. Baiget (n.d.). How it all began: History of the Internet. Vine, No.124, 90-95 Kolko, J. (2010). Does Broadband Boost Local Economic Development? PPIC, accessed on April 5, 2013 from: http://www.ppic.org/content/pubs/report/r_110jkr.PDF Leighton, T. (2009). Improving Performance on the Internet. Communications of the ACM, 52(2), 44-51 This article explores the performance of the Internet and how it can be improved by fast content-delivery systems. The biggest drawback is the middle mile which is the time data takes for movement from origin to end. The solution is a highly distributed approach to content delivery. Litan, R.E. & A.M. Rivlin (2001). Beyond the Dot Coms: The Economic Promise of the Internet, Brookings Institution Press Nottebohm, O. et al (2012) Online and Upcoming: The Internet’s Income on Aspiring Countries, accessed on April 4, 2013 from: http://www.mckinsey.com/client_service/high_tech/latest_thinking/impact_of_the_The Internet_on_aspiring_countries Rainie, L. & B. Wellman (2012). Future of the Networked. New Scientist, 215(2875), 24-25 This article is about social networks and their growing popularity. Social websites like Facebook and Twitter help people to stay connected with friends and relatives across the world. The ubiquity of broadband has enhanced the use of social networks. Samuelson, R.J. (2001). Broadband’s faded promise. Newsweek, 138(25) This article provides an opinion of the Broadband services during the economic trouble in the U.S. The technology did not reach its expected heights. The article also mentions about Enron’s bankruptcy and the bankruptcy of Excite@Home. The article has also focused on the time spent by people on the Internet, and the future of broadband technology. Socolow, M.J. (2013). Tales of the old wild web. Chronicle of Higher Education, B4-B5 Stenberg, P. et al (2010). Broadband The Internet’s Value for Rural America. Journal of Current Issues in Media & Telecommunications, 2(4), 1-62. This article analyzes the impact of the Internet on rural communities in the U.S. In general rural communities have less need of The Internet services than urban communities. Also, the availability of Broadband is not uniform in rural communities. It has been seen that rural communities with greater access of The Internet have experienced greater economic growth. The Economic Impact of Broadband (2009), accessed on April 5, 2013 from: http://download.intel.com/embedded/applications/ipservices-wireless/321293.pdf Read More