David dean e friction refresh tunis ais 04jun15v3

Which Wheels to Grease?
Reducing Friction in the Internet Economy
David R. Dean
Africa Internet Summit
Tunis, 4 June, 2015

ICANN e-friction Refresh AIS Tunis 04Jun15.pptx 1
Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved.
Africa: 300 million people online—10 per cent of the
global Internet population
Source: www.internetworldstats.com
But: 20 per cent of world’s offline population is in Africa
0
10
20
30
40
50
60
70
80
90
100
N. America Oceania Europe LatAm/Carib. Middle East Asia Africa
Online population by continent (%)

Some African countries are well penetrated
Source: www.internetworldstats.com
With over 800m non-users, what’s preventing further
Internet penetration in Africa?
0
10
20
30
40
50
60
Morocco Seychelles Egypt S. Africa Tunisia Mauritius Cabo Verde Nigeria Kenya São Tomé
and
Príncipe
Online population by country (%)

e-Friction: The Global Perspective

More users, traffic, and international capacity
Global Internet users (Bn)
•  0.5 (2000)
•  2.3 (2014)
•  5.0 (2020)
Monthly Internet traffic per user
•  10 MB (2000)
•  5 GB (2013)
•  14 GB (2018)
International bandwidth capacity
•  14 Tbps (2008)
•  137 Tbps (2014)
+12% p.a. +50% p.a.
+46% p.a.
Source: BCG Analysis

The Internet is no longer discretionary
… to social …
… to commerce and
entertainment …
… to ubiquity
From
academia …

The Internet is a pervasive, fast-growing
economic force
0
+10.8%
Developing
Developed
2016
4.2
1.4
2.8
2010
2.3
0.5
1.7
1
2
5
G20 Internet economy (trillion $)
3
4
CAGR
8%
18%
Note: G20 countries only
Source: EIU; Ovum; Gartner; Euromonitor; OECD; country-specific sources; BCG analysis
4.1% of
GDP
5.3% of
GDP

Some digital economies growing much faster
than others
G-20 average:
4.1%
0
5
10
15
20
25
0 2 4 6 8 10
2010–16 e-GDP CAGR (%)
e-GDP as % of GDP, 2010
Spain
Netherlands
Denmark
Sweden
Belgium
Indonesia
Turkey
Russia
Argentina
Brazil
Mexico
India
China
Italy
KSA
France
Canada
Germany
Australia USA
Japan
S. Korea
UKEU27
RSA
350
e-GDP: Internet
contribution to
GDP (US$B)
Developing
Developed
G-20 average:
11%
Powering ahead
Pioneers
Catching up
Lagging behind
Source: EIU; Ovum; Gartner; Euromonitor; OECD; BCG analysis

Not for wider circulation beyond today's
call
The Internet has multiple indirect impacts too
Consumer Surplus ca. €3-4k p.a. per user in many developed economies
•  Ca. 8-10x what consumers pay for the Internet several European countries
•  Ca. $3T in value globally
Research Online, Purchase Offline (ROPO), B2B, C2C
•  ROPO over $1.5T in G20
•  ROPO up to 15-25% of retail sales in UK, USA, France and Germany
SMEs with heavy Internet use benefit significantly from the Internet
•  Grow 1.5-2x faster
•  Sell further afield, with ~50% higher exports – e.g. virtually all eBay sellers in Chile,
India and S. Africa export, vs. only 12-25% of offline sellers

The Internet economy is not frictionless
"Is there
network coverage?"
"I don't speak
Thai!"
"No connectivity
….."
"Can it be
delivered here?"
"Can I trust
online payments?"
"How much is this
going to cost me?"
"Do I have an
access device?"
"Will my bid go
through in time?"

“e-Friction”: factors holding back the
development of the Internet economy
Source: BCG e-Friction model
Infrastructure
Weighted 3/6
Industry
Weighted 1/6
Frictions holding
back companies
from adopting
the Internet
Frictions related
to the availability
of content
Frictions deterring
consumers from
online activity
Frictions reducing
opportunities to
access the
Internet

Infrastructure InformationIndustry Individuals
Infrastructure
Number of Wikipedia pages in
home language (Wikipedia)
Number of micro messages made
in home language, messages/day
(Twitter)
Freedom of the press index,
0-100 (Reporters Without
Borders)
Freedom on the Net, score
0-100
(Freedom House)
ONI transparency rating, 1-15
(Open Net Initiative)
Commitment to open data, 0-1
(Open Knowledge Foundation)
Information
Volume
Industry
InfraTechLabourCapitalEconomy
Quality of transport infra for
physical fulfilment, 0-7 (WEF)
Quality of electricity and telephony
infra, 0-7 (WEF)
ICT skills, 1-10 (IMD)
Quality of math and science
education, 0-7 (WEF)
Availability of qualified engineers,
0-7 (WEF)
Capacity for innovation, 0-7 (WEF)
Firm-level technology absorption,
0-7 (WEF)
Business fixed broadband
penetration, % (Pyramid
Research)
Venture capital availability, 0-7
(WEF)
Financial market sophistication,
0-7 (WEF)
Financing through local equity
market, 0-7 (WEF)
Ease of access to loans, 0-7
(WEF)
Foreign direct investment to GDP,
ratio (WEF)
Strength of IP protection, 0-7
(WEF)
Burden of customs procedures,
0-7 (WEF)
Prevalence of trade barriers, 0-7
(WEF)
Number of days to set up a
business (WEF)
AbilityBanking
Quality of educational system, 0-7
(WEF)
Adult literacy rate, % (WEF)
ICT skills, 1-10 (IMD)
Consumer broadband penetration,
% (Pyramid)
Availability of financial services,
0-7 (WEF)
Affordability of financial services,
0-7 (WEF)
Market penetration of bank
accounts, % (WEF)
AccessTrust
Individuals
Cyber security being adequately
addressed, 1-10 (IMD)
Population using online personal
finance, % (ComSc)
Debit card penetration, % (WEF)
Trust in privacy of credit card/
financial data, survey score (BCG)
Trust in privacy of other personal
data, survey score (BCG)
No. of domains registered to each
ccTLD/cap (Google)
ObstaclesAttitudes
Payments
The components of e-Friction – 55 indicators
Speed
Peak fixed BB connection speed,
Mbps (Akamai)
Peak mobile connection speed,
Mbps (Akamai)
Average fixed BB connection
speed, Mbps (Akamai)
Price
Fixed BB pricing, $/month at PPP
(WEF)
Mobile pricing, $/min local call off-
net (peak) at PPP (IMD)
Architecture
Number of networks (ASNs)/cap
(Potaroo)
Exchange points/capita (Euro-IX)
Existence of indep. regulator, 0-1
score (ITU)
Number of IPv4 registrations/
capita (Potaroo)
Number of IPv6 registrations/
capita (Potaroo)
Traffic
International Internet bandwidth/
cap (Telegeography)
International traffic volumes /
capita, Mbps (Telegeography)
Traffic volumes/capita, Mbps
(Cisco)
Average mobile connection speed,
Mbps (Akamai)
Content registered to ccTLD
hosted onshore, % (Pingdom)
Internet users, % of pop (World
Bank)
Mobile Internet subscription
penetration, % (Ovum)
Access
Internet bandwidth/capita (ITU)
Fraction of population using
social networks, % (Comscore)
Source: BCG e-Friction model

e-Friction Index includes 65 countries
Covering 92% of global economy and 81% of global population
Country
e-Friction
score
Infra-
structure
Industry Individual
Infor-
mation
1. Sweden 14 15 15 10 16
2. Finland 17 21 16 8 14
3. Denmark 21 21 37 15 11
4. Switzerland 21 22 21 13 27
5. Hong Kong 21 18 9 22 43
6. United States 22 23 26 28 11
7. Iceland 22 17 34 36 14
8. Norway 23 25 26 14 20
9. Netherlands 25 28 21 13 30
10. Canada 25 32 28 13 15
11. Germany 26 28 35 17 18
12. United Kingdom 28 29 27 29 25
13. Austria 29 27 40 25 29
14. Australia 30 38 26 27 15
15. Singapore 31 30 9 25 66
16. Belgium 32 34 27 23 42
17. New Zealand 33 42 30 27 17
18. Ireland 34 34 41 36 24
19. France 34 38 33 26 32
20. Estonia 35 35 47 43 19
21. Japan 39 33 32 50 53
22. Israel 39 37 39 39 48
23. Qatar 40 51 19 23 44
24. UAE 41 45 25 33 49
25. Korea, Rep. 41 28 45 47 69
26. Slovenia 44 34 58 56 47
27. Bahrain 44 41 42 36 60
28. Malaysia 44 52 28 42 40
29. Poland 45 45 65 42 31
30. Portugal 45 43 43 49 51
31. Romania 46 29 81 70 35
32. Czech Republic 46 38 62 47 54
Country
e-Friction
score
Infra-
structure
Industry Individual
Infor-
mation
33. Spain 47 46 52 43 51
34. Panama 48 42 39 57 65
35. Hungary 48 47 62 59 30
36. Italy 49 42 64 62 41
37. Bulgaria 53 39 71 76 55
38. Greece 53 49 65 65 43
39. Ukraine 54 45 77 74 33
40. Kuwait 56 55 73 53 47
41. Chile 57 60 44 55 61
42. Jordan 57 53 48 67 69
43. Russia 57 49 73 59 66
44. Saudi Arabia 58 54 36 54 92
45. Turkey 58 52 60 59 76
46. Kazakhstan 64 58 70 61 76
47. Philippines 64 71 61 65 43
48. Thailand 64 61 59 63 81
49. Argentina 67 61 91 76 53
50. South Africa 67 75 50 63 68
51. Mexico 68 66 69 79 59
52. Brazil 69 67 71 71 68
53. China 69 73 56 66 75
54. Morocco 70 72 58 76 73
55. Venezuela 71 66 88 80 58
56. Colombia 71 72 76 75 61
57. Kenya 71 80 71 68 51
58. India 73 79 52 71 77
59. Indonesia 74 78 56 75 78
60. Peru 75 79 71 84 55
61. Vietnam 75 69 73 82 87
62. Bangladesh 75 74 86 90 53
63. Egypt 76 78 77 92 55
64. Pakistan 82 79 72 89 92
65. Nigeria 82 89 77 86 59Top Bottom - Quintiles
Note: Best e-Friction available is 0, worst is 100

Country
e-Friction
score
Infra-
structure
Industry Individual
Infor-
mation
1. Sweden 14 15 15 10 16
2. Finland 17 21 16 8 14
3. Denmark 21 21 37 15 11
4. Switzerland 21 22 21 13 27
5. Hong Kong 21 18 9 22 43
6. United States 22 23 26 28 11
7. Iceland 22 17 34 36 14
8. Norway 23 25 26 14 20
9. Netherlands 25 28 21 13 30
10. Canada 25 32 28 13 15
11. Germany 26 28 35 17 18
12. United Kingdom 28 29 27 29 25
13. Austria 29 27 40 25 29
14. Australia 30 38 26 27 15
15. Singapore 31 30 9 25 66
16. Belgium 32 34 27 23 42
17. New Zealand 33 42 30 27 17
18. Ireland 34 34 41 36 24
19. France 34 38 33 26 32
20. Estonia 35 35 47 43 19
21. Japan 39 33 32 50 53
22. Israel 39 37 39 39 48
23. Qatar 40 51 19 23 44
24. UAE 41 45 25 33 49
25. Korea, Rep. 41 28 45 47 69
26. Slovenia 44 34 58 56 47
27. Bahrain 44 41 42 36 60
28. Malaysia 44 52 28 42 40
29. Poland 45 45 65 42 31
30. Portugal 45 43 43 49 51
31. Romania 46 29 81 70 35
32. Czech Republic 46 38 62 47 54
Country
e-Friction
score
Infra-
structure
Industry Individual
Infor-
mation
33. Spain 47 46 52 43 51
34. Panama 48 42 39 57 65
35. Hungary 48 47 62 59 30
36. Italy 49 42 64 62 41
37. Bulgaria 53 39 71 76 55
38. Greece 53 49 65 65 43
39. Ukraine 54 45 77 74 33
40. Kuwait 56 55 73 53 47
41. Chile 57 60 44 55 61
42. Jordan 57 53 48 67 69
43. Russia 57 49 73 59 66
44. Saudi Arabia 58 54 36 54 92
45. Turkey 58 52 60 59 76
46. Kazakhstan 64 58 70 61 76
47. Philippines 64 71 61 65 43
48. Thailand 64 61 59 63 81
49. Argentina 67 61 91 76 53
50. South Africa 67 75 50 63 68
51. Mexico 68 66 69 79 59
52. Brazil 69 67 71 71 68
53. China 69 73 56 66 75
54. Morocco 70 72 58 76 73
55. Venezuela 71 66 88 80 58
56. Colombia 71 72 76 75 61
57. Kenya 71 80 71 68 51
58. India 73 79 52 71 77
59. Indonesia 74 78 56 75 78
60. Peru 75 79 71 84 55
61. Vietnam 75 69 73 82 87
62. Bangladesh 75 74 86 90 53
63. Egypt 76 78 77 92 55
64. Pakistan 82 79 72 89 92
65. Nigeria 82 89 77 86 59Top Bottom - Quintiles
Note: Best e-Friction available is 0, worst is 100
So how do African countries perform?

Lower e-Friction – higher Internet penetration
National Internet penetration vs. e-Friction score
Source: Digital, Social and Mobile 2015 – slide 17 – Quoted source: InternetLiveStats Q12015, InternetWorldStats Q12015. Wikipedia for population data.
0% 20% 40% 60% 80% 100%
GermanyHong Kong
National Internet penetration (%)
United Kingdom
United States
e-Friction score
Canada
United Arab Emirates
Singapore
Korea, Rep.
Japan
France
Australia
Spain
PolandMalaysia
Italy
Turkey
Thailand
South Africa
Russia
Philippines
Brazil
Argentina
Vietnam
Nigeria
Indonesia
India
Egypt
Top Bottom - Quintiles
0
100
20
40
60
80
R2 = 0.76

Positive economic impact of lower e-Friction
Relationship between size of digital economy and e-Friction
0%
8%
6%
70
4%
2%
50 01020304080 60
Turkey
Sweden
South Africa
Saudi Arabia
Russia
Poland
Netherlands
Mexico
Korea, Rep. Japan
Italy
Indonesia
India
Hong Kong
Greece
Germany
France
e-Friction score, 2013
Denmark
Czech Republic
China
Canada
Brazil
Egypt
Australia
Argentina
2013 digital economy1
as % of GDP (est.)
United States
United Kingdom
Belgium
R2=0.60
Equivalent to
2.5 pts of the
overall economy
Bottom quintile
e-Friction
Top
quintile e-
Friction
1. 2013 estimates interpolated from 2010 and 2011 actuals and 2016 forecasts; 2. in the 65 countries covered.
Source: BCG e-GDP model, BCG e-Friction model
Significant impact "beyond GDP": "ROPO", consumer surplus,
C2C, SME growth, etc.
>3.2 B unconnected people2

Which wheels to grease?
Wealth ≠ Destiny ! Rural ≠ Unconnected !

Richer countries tend to have lower e-Friction
10 1001
e-Friction score
GDP per capita ('000 US$ - log scale)
0
100
20
40
60
80
GDP per capita vs. e-Friction score
Source: World Bank GDP per capita (current US$) year 2012; Bangladesh omitted on this chart as GDP per capita under $1,000
R2 = 0.63
But wealth is not necessarily destiny – widespread of e-Friction
scores at each wealth level

Wealth is important, but doesn’t alone explain
e-Friction
e-Friction score vs. GDP per capita
Source: World Bank GDP per capita (current US$) year 2012; Bangladesh omitted on this chart as GDP per capita under $1,000
How to reduce e-Friction in Developing Rural countries?
100101
Jordan
Japan
Italy
Israel
Ireland
Indonesia
Iceland
Hungary
HK
Greece
Germany
France
Finland
Estonia
Egypt
Denmark
Czech Qatar
China
Chile
Canada
Bulgaria
Brazil
Belgium
Bahrain
Austria
Australia
Argentina
Russia
Colombia
Romania
Portugal
Poland
Philippines
Peru
Panama
Pakistan
Norway
Nigeria
NZ
NL
Morocco Mexico
Malaysia
Kuwait
e-Friction score
GDP per capita ('000 US$ - log scale)
Korea
Kenya
Kazakhstan
Vietnam Venezuela
US
India
UAE
Ukraine
Turkey
Thailand
Switzerland
Sweden
Spain
SA
Slovenia Singapore
Saudi
UK
Well-oiled
Developing Rural Middle-Income Rural
Middle-Income
Urban Aspirants
High-Income
Aspirants
All-rounders0
100
20
40
60
80
High-Income
OverachieversMiddle-Income
Overachievers
ë
ë
ë
ë

DDI - Working Group discussion 4_15January_vff.pptx 19
Approach to building rural infra can be different based on degree of
urbanization and wealth of the country
Urban
Environment
Wealth
Moderate GDP
per Capita
($5-15k)
Rural
Potential priorities:
—  Leapfrog infrastructure (4G)
—  Spur local app ecosystems to drive
demand
—  Encourage enabling applications like
identity, payments
Example case studies:
—  Philippines
—  Invest in enabling infrastructure (IXPs,
fiber-optics)
—  Engage SMEs in digital economy
—  Expand digital employment
—  China: Balance of mobile/fixed
infrastructure investment
—  Publicly fund basic infrastructure
access
—  Reduce connectivity costs
—  Provide remote eGov, eHealth,
eEducation services
—  Rwanda
—  Encourage private infrastructure
investment
—  Prove value of internet to encourage
adoption
—  Malaysia PPP
Source: BCG Project “Delivering on Digital Infrastructure” for The World Economic Forum
Low GDP
per Capita
(<$5k)
Rural connectivity

DIA - working session- Oct 514_v03.pptx 20
Choosing the right tech critical from a cost and service quality perspective
Urban area with
backbone
Source: BCG Analysis, Filiago, Google, Facebook, BCG Project “Delivering on Digital Infrastructure” for The World Economic Forum
Rural area
Facebook Drone
Google Loon
Node
•  Geo-stationary orbit
•  Middle earth orbit
•  Lower earth orbit
Satellite connectivity
Mobile/Fixed wireless
•  Line of sight unit
•  Indoor unit
Fiber
•  FTTN
•  FTTP
Fixed
ground
Wireless
1k-36kkm
Mobile/Fixed
wireless,<1km
Fiber
Copper
Legend
Experimental
Operational
Affordability,
quality
High
Medium
Low
Unknown

DIA - working session- Oct 514_v03.pptx 21
4G3
4G4G1 4G24G1
2G 2G2G 2G 2G2G 2G 2G2G/3G 2G
4G4G 4G 4G4G 4G 4G
2G/3G/
4G
2G 2G2G/3G
4G2
4G 4G 4G
2G 2G2G/4G 2G/4G2G 2G/3G 2G/4G2G/4G 2G2G/4G
3G/4G3G 3G3G 3G3G 3G 4G34G 3G3G/4G 3G3G
2G/3G2G/3G 2G/3G2G/3G
4G 4G 4G
4G
3G
3G
3G/4G
3G/4G
4G
2G
4G
583447 n/a605 n/a 459314 240 279390 n/an/a 190
Current spectrum snapshot shows potential for higher allocation and
utilization across countries
Spectrum
"Coverage"
frequencies
(sub 1GHz)
"Capacity"
frequencies
USAChina Singap. India
Asia
S. Arabia U.A.E.Qatar
Middle East
BoliviaColombiaBrazil
Latin America
AngolaS. Africa
Total mobile spectrum
700MHz
450MHz
900MHz
2.5GHz
1.9GHz
2.3GHz
Nigeria
Africa
3.5GHz
1.8GHz
2.1GHz
850MHz
800MHz
Refarming potential
to increase network
capacity where spectrum
becomes scarce resource
Ineffective roll out of allocated
spectrum: US MNO have more
than 583MHz but only about
192MHz are in use. Thereof about
90% are used for 2G, 3G and
3.5G
Allocation and clearance of established
mobile spectrum has high potential in
emerging markets (mostly locked in military
and analog TV)
Spectrum allocated to high speed
Spectrum allocated to low speed
Spectrum not allocated to mobile
1. Announced to be auctioned 2. Partial coverage only (i.e., large cities) 3. Allocated to mobile but not deployed
Note: 2.6GHz included in 2.5GHz; 1.7GHz included in 2.1GHz; For some countries total spectrum varies strongly by region or n/a
Source: GSM Arena; BCG analysis, BCG Project “Delivering on Digital Infrastructure” for The World Economic Forum

Which wheels to grease beyond
infrastructure?
Literacy
Local
Content
ICT
Skills

Higher literacy – lower e-Friction
Illiteracy and e-Friction score by e-Friction quintile
0
100
20
40
60
80
Source: WEF GCI http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/ - 01/10/2013 - 2011 data
0.1 100101
Sweden
Vietnam
Venezuela
Peru
PakistanNigeria
Morocco
Kenya
Indonesia
India
Egypt
Colombia
China
Norway
Japan Israel
Ireland
France
Estonia
Belgium
Malaysia
Italy
Hungary
Greece
Czech
Bulgaria
Bangladesh
US
NL
Iceland
Germany
Finland
Denmark
Canada
e-Friction score
Illiteracy (%) – log scale
UK
Switzerland
Austria
UAESlovenia
Singapore
Qatar
NZ
Korea, Rep.
Bahrain
Turkey
Thailand
SA
SaudiRussia
Philippines Mexico
Kuwait
Kazakhstan
Jordan
Chile
Brazil
Argentina
Australia
Ukraine
Spain
Romania
Portugal
Poland Panama
Over 98 percent of illiterate people can be found in countries with high or very high e-Friction
– with over 800 million in predominantly rural countries

Most illiterate people live in predominantly
rural countries
20%
40%
60%
80%
100%
10 10010.1
Switzerland
Israel
Ireland
France
Estonia
Belgium
Ukraine
Spain
Romania
Portugal
Poland
Panama
Malaysia
Italy
Hungary
Urban population (%)
Sweden
Norway
Netherlands
Germany
Denmark
Austria
United Arab Emirates
Slovenia
Singapore
Qatar
Japan
Greece
Czech Republic
Bulgaria
Bahrain
Turkey
Thailand
South Africa
Saudi Arabia
Russia
Philippines
Mexico
Illiteracy (%-log scale)
Kazakhstan
Jordan
Chile
Brazil
Argentina
Vietnam
Venezuela
Peru
Pakistan
Kuwait
Morocco
Kenya
Indonesia
India
Egypt
Colombia
China
Bangladesh
United Kingdom
Nigeria
Illiteracy rate (log scale) vs Urban population (%)
Sources: e-Friction component scores from BCG e-Friction model
Literacy rate from: WEF GCI http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/ - 01/10/2013 - 2011 data
Urban population %: from Euromonitor and are 2012 numbers
Over 800m
illiterate people

Is English proficiency a pre-requisite for low
e-Friction?
35 40 45 50 55 60 65 70
Poland
Peru
Portugal
Qatar
Romania
Panama
Russia
Indonesia
India
Hungary
Germany
France
Norway Netherlands
Morocco
Mexico
Malaysia
English Proficiency1
e-Friction score
Vietnam
Venezuela
Ukraine
Turkey
Thailand
Switzerland
Sweden
Kuwait
Kazakhstan
Jordan
Japan
Italy
Slovenia
Saudi
Spain
Singapore
Finland
Estonia
Egypt
Denmark
Czech
Colombia
Argentina
China
Chile
Brazil
Belgium
Austria
English proficiency and e-Friction score
0
20
40
60
80
Source: 1. EF English Proficiency Index 2014
R2 = 0.53
Two interventions possible: creation of more local language
content, and/or development of English-language skills

Key messages so far
A high share of the global population is in countries with above average e-Friction
•  80 percent of the global population, but over 90 percent of the global offline
population
Countries in the top quintile have digital economies that are, on average, 2.5
percentage points larger than those in the bottom quintile
•  A conservative indication of the Internet’s impact, given that much impact is “beyond
GDP”
Some countries “get it right” on all components of e-Friction
•  Most have quite variable performance across the four components of e-Friction
Important to recognize that there is no “silver bullet” for capturing the Internet’s
impact
•  Many levers need addressing simultaneously and in a coordinated manner

e-Friction: The SME Perspective

Greasing the wheels to get SMEs online
Sonitus Engenharia: Brazilian automotive
engineering company: Growth through
online tools–Flavio Quintela
Dowhile: S. African graphics company:
Online marketing & training
–Dennis Ngwepe

+7%
-3
0
3
6
9
12
15
18
21
24
27
30
33
36
39
42
45%
The Internet helps SMEs grow their revenues
Higher
e-Friction
Lower
e-Friction
Average
Past three years
Cumulative revenue growth
Heavy
web use
+18%
Med / light
web use
+11%
Source: BCG SME Internet e-Friction survey 2013
In addition, extended geographical reach of sales –
Higher domestic coverage and higher international sales

0
25
50
75
100
City
93%
97%
Neighbour-
hood
Med/light
web use
Heavy
web use
World
13%
22%
Country
48%
58%
Region
71%
81%
% of SMEs
+6%
+17%
+34%
+49%
0
25
50
75
100
Heavy
web use
Region
65%
77%
City
90%
96%
% of SMEs
Neighbour-
hood
World
12%
18%
Country
40%
53%
Med/light
web use
The Internet helps SMEs extend their
geographical reach
Geographical reach of sales Geographical reach of purchases
+5%
+14%
+23%
+63%

Reducing e-Friction essential to help SMEs do
more onlineIndustryIndividualsInfrastructure
35%
36%
47%
48%
43%
46%
30%
28%
31%
30%
36%
33%
31%
42%
45%
38%
52%
57%
23%
31%
39%
40%
44%
57%
42%
43%
40%
48%
54%Difficulty to obtain a website domain 22%
Cost to obtain a website domain 26%
Choice of online tools providers 27%
Complexity to set up and maintain a website 29%
Cost to set up and maintain a website 30%
Customers interest to interact via website 23%
Customers’ skills to be online 28%
Customers ownership of tools to be online 30%
Safety to store our data or sell online 31%
Consumer trust in online payment systems 38%
Belief in safety of personal data online 51%
Employees access to computers 23%
Belief in Internet’s contribution to the business 25%
Willingness to buy online due to return policy 30%
Staff preparedness for online activities 30%
Company’s fund to further develop the online offer 30%
Reliability of intellectual property rights online 33%
Offline infrastructure to support online sales 34%
Hiring of managers for online activities 35%
Availability of market funding for online offer 36%
Availability of industry support group 37%
Supportive regulations to encourage online sales 37%
Process to start a new business 41%
Reliability of Internet service providers 24%
Choice of internet providers 27%
Cost of internet access 27%
Quality of internet connection 28%
Regulations to operate online 31%
Cost of access to tools to be online 32%
Infor-
mation
SMEs' view on e-Frictions within their country
Problem Neutral No problem

Multi-stakeholder approach necessary to
reduce e-Friction
The starting point: the metrics!

Reducing e-Friction across Africa can deliver
enormous potential
An Internet economy of 5 per cent of GDP
•  An additional $100B for the continent’s economy
•  Many indirect benefits too
Another 500 million people online
•  $150-250B in consumer surplus
Investment in skills
•  ca. 20 million jobs created for each percentage point increase in the size of the Internet
economy
Social benefits
•  Access to health, education, financial services, etc.
Trade
•  Increasingly, the Internet drives cross-border and international trade

“Which Wheels to Grease?”
An Agenda for policy makers
§  Do not see "wealth as destiny": many levers exist to reduce e-Friction, whatever the
level of GDP
§  Innovate in infrastructure deployment: affordable infrastructure for low population
density areas requires new technologies, business models and policies
§  Drive for literacy: basic literacy, English-language skills and ICT skills all help
reduce e-Friction
§  Encourage local relevance: local content in local languages drives usage, requiring
encouragement of local ecosystems, including e-government services
§  Get companies online: SMEs that use the Internet intensively grow faster, employ
more people than those that don’t, and trade more internationally
§  Encourage “joined-up” policy making: drive for multi-stakeholder involvement from
across the ecosystem and learnings from relevant peers
1
2
3
4
5
6

Where to find the reports
BCG’s website:
http://tinyurl.com/o65xoob
http://tinyurl.com/pe3gjc5
ICANN’s website:
http://tinyurl.com/n9lw5kg

Thank you
bcg.com | bcgperspectives.com

Extra Slides

E-Friction scorecard: Egypt
Infrastructure
Overall 78
Indicator friction score
Access
Internet bandwidth per capita 92
International Internet bandwidth per
capita 89
Consumer broadband penetration (%) 91
Business fixed broadband penetration
(%) 89
Mobile internet subscription penetration
(%) 88
Number of IPv4 registrations per capita 84
Speed
Peak fixed broaband connection speed 96
Average fixed broadband connection
speed 100
Peak mobile connection speed 90
Average mobile connection speed 100
Price
Fixed broadband pricing ($ per month
at PPP) 10
Mobile pricing ($ per min local call off-
net (peak) at PPP) NA
Traffic
Traffic volumes per capita NA
International traffic vols per capita NA
Architecture
Exchange points per capita 86
Number of networks (ASNs) per capita 91
Content registered to cc'TLD hosted
onshore (%) 58
Existence of independent regulator* 1
Industry
Overall 77
Infra
Quality of transport infrastructure
for physical fulfillment 78
Quality of electricity and
telephony infrastructure 91
Labour ICT skills NA
Quality of maths & science
education 98
Availability of qualified engineers 58
Capacity for innovation 92
Capital
Financial market sophistication* 81
market 53
Ease of access to loans 78
FDI to GDP ratio NA
Venture capital availability 52
Economy
Strength IP protection 80
Burden of customs procedures 78
Prevalence of trade barriers 97
business 47
Tech
Company-level technology
absorption 86
Individual
Overall 92
Ability
Quality of educational system 98
Adult literacy rate (%) 92
ICT skills NA
Accss
Internet users (%) 76
Banking
Availability of financial
services 95
Affordability of financial
services 88
accounts (%) 100
Payments
Population using online
personal finance (%) NA
Debit card penetration (%) 96Trust
Cyber security being
adequately addressed NA
financial data NA
Trust in privacy of other
personal data NA
Information
Overall 55
Sites
Number of domains
registered to each ccTLD per
capita
81
Content
Number of online open
encyclopaedia pages in local
language
31
Number of micro messages
made in home language* 8
Share of population using
social networks (%) NA
Data
Commitment to open data 83
Objectivity
Press freedom index 91
Freedom on the net 81
Obstcls
Filtering score* 1
e-Friction Score: 76
Notes: the best e-Friction score a country can achieve on any given indicator is 0 while the worse is 100, * some variables are in a discrete scale with several countries sharing an equal ranking
Source: BCG e-Friction model. Found in BCG Perspectives "Greasing the Wheels of the Internet Economy: a Country by Country e-Friction Analysis"
Rank: 63 of 65

E-Friction scorecard: Kenya
Infrastructure
Overall 80
Access
capita 94
Consumer broadband penetration (%) NA
(%) NA
(%) 94
Number of IPv6 registrations per capita NA
Speed
Peak fixed broaband connection speed NA
speed NA
Peak mobile connection speed NA
Average mobile connection speed NA
Price
at PPP) 98
Traffic
Architecture
onshore (%) 94
Industry
Overall 71
Infra
education 75
Capital
market 43
FDI to GDP ratio NA
Economy
business 94
Tech
absorption 67
Individual
Overall 68
Ability
ICT skills NA
Accss
Banking
services 60
services 64
accounts (%) 67
Payments
financial data NA
personal data NA
Information
Overall 51
Sites
Number of domains
capita
75
Content
language
27
Data
Objectivity
Obstcls
Filtering score* NA
Rank: 57 of 65

E-Friction scorecard: Morocco
Infrastructure
Overall 72
Access
capita 81
(%) 98
(%) NA
Number of IPv6 registrations per capita NA
Speed
speed NA
Price
at PPP) 19
Traffic
International traffic vols per capita 82
Architecture
Exchange points per capita NA
onshore (%) 88
Industry
Overall 58
Infra
education 50
Capital
market 47
FDI to GDP ratio 53
Economy
business 18
Tech
absorption 80
Individual
Overall 76
Ability
ICT skills NA
Accss
Banking
services 66
services 63
accounts (%) 76
Payments
financial data NA
personal data NA
Information
Overall 73
Sites
Number of domains
capita
53
Content
language
52
Data
Objectivity
Obstcls
Filtering score* 68
Rank: 54 of 65

E-Friction scorecard: Nigeria
Infrastructure
Overall 89
Access
capita 98
(%) 100
(%) 96
Speed
speed NA
Peak mobile connection speed NA
Average mobile connection speed NA
Price
at PPP) 100
Traffic
Architecture
onshore (%) 100
Industry
Overall 77
Infra
education 91
Capital
market 60
FDI to GDP ratio 34
Economy
business 47
Tech
absorption 74
Individual
Overall 86
Ability
ICT skills NA
Accss
Banking
services 86
services 77
accounts (%) 84
Payments
financial data NA
personal data NA
Information
Overall 59
Sites
Number of domains
capita
97
Content
language
100
made in home language* NA
Data
Objectivity
Obstcls
Filtering score* 1
Rank: 65 of 65

E-Friction scorecard: South Africa
Infrastructure
Overall 75
Access
capita 91
(%) 75
(%) 71
Speed
Peak fixed broaband connection speed 100
speed 85
Price
at PPP) 86
net (peak) at PPP) 38
Traffic
Traffic volumes per capita 89
Architecture
onshore (%) 61
Industry
Overall 50
Infra
Labour ICT skills 98
education 100
Capital
market 2
FDI to GDP ratio 89
Economy
business 4
Tech
absorption 47
Individual
Overall 63
Ability
ICT skills 98
Accss
Banking
services 2
services 16
accounts (%) 58
Payments
personal finance (%) 92
adequately addressed 58
financial data NA
personal data NA
Information
Overall 68
Sites
Number of domains
capita
74
Content
language
97
made in home language* NA
social networks (%) 92
Data
Objectivity
Obstcls
Filtering score* NA
Rank: 50 of 65

David dean e friction refresh tunis ais 04jun15v3

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