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ELM News ImageICT drives 50% of EU growth, says Commission's annual report on the digital economy

Public and private investment in information and communication technology (ICT) is bearing fruit, finds the Commission's annual progress report on i2010 • the digitally-led strategy for growth and jobs. Technology is fuelling innovation and productivity, and there are signs of fundamental change in markets and user behaviour, as Europe moves towards a knowledge-based economy.

"Our integrated European policy for growth and jobs is now starting to pay dividends," said Viviane Reding, EU Commissioner for Information Society and Media. "However, let's not be complacent. ICT companies in Europe are still not able to profit from economies of scale in view of regulatory fragmentation that blocks the emergence of pan-European services and hurts the chances of e-communication operators and software companies to compete on the world market. The EU and its Member States need in particular to make a greater effort to remove the remaining impediments within the internal market for online services."

Each year, the annual report on i2010 • the EU's policy strategy to boost the digital economy by combining research, regulatory tools and public-private partnerships assesses the economic impact of EU Member States' efforts to deploy ICT, and provides a benchmark on the effectiveness of the Commission's policy to build sustainable economic growth in such technologies.

The ICT sector continues to grow faster than Europe's overall economy, according to the i2010 second annual report. ICT contributed nearly 50% of EU productivity growth between 2000 and 2004, with software and IT services currently the most dynamic growth area (5.9% for 2006-2007).

The report also shows that businesses are investing in new and more mature ICT solutions, and Europeans are quickly embracing new online services. This is supported by a record number of new broadband connections: 20.1 million new broadband lines (see IP/06/1122), connected in the year to October 2006, with high broadband penetration rates in The Netherlands (30%) and the Nordic Countries (25-29%). The online content market is forecast to grow rapidly for the next five years, as already seen with the explosive growth of online music sales and user-created content (see IP/07/95).

European research received a major boost from the 7th Framework Research Programme's launch, the largest single item of which is over €9 billion for ICT research (see IP/06/1590). However, despite national investment expected to bring research spending to 2.6% of GDP by 2010, a further effort is still needed if the EU is to reach its 3% target.

The Commission's eGovernment Action plan has helped Member States boost public services online. These are increasingly sophisticated, and more Europeans use them. ICT support for healthcare and education across Europe are also experiencing strong growth. However, in creating such services, administrations must ensure that all citizens can access them and benefit from the information society in general, a view endorsed by 34 Ministers in Riga in June 2006.

At a national level, the report reveals that Italy leads in 3G mobile phone and fibre development while the most households with digital TV are in the UK. Six countries • Denmark, The Netherlands, Finland, Sweden, the UK and Belgium • all have higher broadband penetration rates than the US and Japan. Such broadband penetration levels have positive knock-on effects. For example ICT-deployment in Danish schools is the highest in the Europe, and Danish businesses are the EU's most advanced Internet and eBusiness users; the British and Swedish workforce are the most skilled in ICT; the Dutch are the most avid consumers of games and music online; and Finland has Europe's highest use of public access points and invests the most in ICT research (64.3% of its R&D business expenditure) • Sweden and Finland also spend 3.9% and 3.5% of their GDP on research, this being over the EU's 3% target.

This year's i2010 report also sets out key policy issues for the future which will be debated during a review of the i2010 strategy later in 2007. These include assessing the policy implications of emerging trends in networks and the Internet; strengthening the user perspective in ICT innovation; and improving growth by removing artificial "national borders" for online services. The review will begin with a round table on next generation networks and the Internet in the autumn.