1 Introduction

1.1 An agenda for the digital revolution

This white paper presents the Government’s policy on how Norwegian society should take advantage of opportunities offered by ICT and the internet for value creation and innovation.

We are in the midst of a technological and social revolution that is based on the internet and on new ways of using ICT. In only 20 years, technology has radically changed our lives. Whether we like it or not, this technology plays an increasingly larger role in everyday life. ICT is used in everything: from telephones, cars, TVs, home appliances, and radiators, to passenger information displays at bus stops. Technology is used in almost every home, school, hospital, and public meeting place as well as in most workplaces and public institutions. The internet, computers, and mobile phones have changed how we search for information, communicate with each other, and consume entertainment.

We can safely say that we are experiencing a digital revolution. Technology and society are changing rapidly, far more so than during the Industrial Revolution around 200 years ago. Machines were the basis of the Industrial Revolution; the internet and web services form the basis of today’s digital revolution.

Use of the internet became widespread 20 years ago, and since then the size of the network and the volume of information exchanged have steadily increased. Internet traffic is growing 30–35 per cent yearly,1 meaning that traffic almost doubles every other year. This growth is partly due to new users and partly due to the fact that more and more things are being connected to the internet. According to predictions by networking company Cisco, up to 19 billion devices will be communicating via the internet by 2016: in 2010 there were 9 billion.

The internet fundamentally affects our everyday lives. It provides the basis for new forms of social interaction and communication. It drives and supports change in existing services and development of new ones. It also facilitates productivity growth. Through increasingly less expensive and better ICT equipment, the internet has provided the basis for significant innovation in business and industry and for a highly profitable ICT industry.

In a growing number of areas, ICT is no longer a supporting function, but rather the core of the operation. ICT fundamentally transforms how goods and services are supplied. Many industries, such as banking and travel, have understood and used ICT innovatively to give customers better, faster services and to improve the efficiency of their internal processes. Fifteen years ago most people paid their bills by visiting their local bank; today, 86 per cent of us use online banking services.2 In other industries, digitisation has not fundamentally affected how they produce and supply their services to the same degree, even if we have seen some changes. This applies to areas such as the media industry, the health and care sector, and parts of the public sector. In future, these areas will similarly change because of new web-based services and business models.

Value creation potential

In 2011, the research unit of the authoritative news magazine The Economist conducted a survey. Eight hundred leading experts and investment fund managers were asked how they thought various scenarios would affect the global economy and, consequently, their investments. Their answers reflected the currently difficult times: all 24 scenarios were assessed as negative, such as continued political unrest in the Middle East, or as unlikely, such as agreement on a new climate change treaty. There was only one exception – which was both positive and likely – and that was that ‘The internet and social media are a catalyst behind rapid political and economic change around the world.’3 The answers reveal the internet’s significance for the global economy.

According to a University of Groningen study, 50 per cent of European productivity growth is attributed to ICT and internet use.4 A McKinsey analysis in nine countries estimates that 21 per cent of GNP growth in 2004–2009 can be attributed to the internet alone.5

The EU has launched its Digital Agenda for Europe as an important initiative to address the financial crisis through smart, sustainable, and inclusive growth based on ICT. The EU’s digital agenda is one of several so-called ‘flagship initiatives’ linked to the general strategy Europe 2020,which responds to the economic crisis. This strategy ranks ICT on a par with education, innovation, and environmental policy.

ICT and the internet contribute towards value creation in many ways. Every enterprise can be operated more efficiently. Old products can be replaced by new. Better information can help bring together buyers and sellers. Products previously sold only locally can now join the global market. The need for intermediaries such as stockbrokers and record shops is diminishing. The more widely knowledge is disseminated, the more valuable it becomes. Ideas and new services are being provided faster and to wider audiences. Consumers and buyers can choose from a wider array of suppliers and can compare price and quality, thereby increasing competition, and compelling companies to operate more efficiently.

The Government’s policy foresees ICT becoming a future source of significant social improvements, and ICT-related growth and productivity will thereby be important for our welfare and prosperity.

Advantages and challenges

Norway’s inherent advantages and future challenges must determine its ICT policy. Two of the challenges are that the Norwegian economy is characterised by many small enterprises and that Norway has fewer industrial actors than do many of our trading partners. The domestic market for these enterprises is quite small, and the distance to the larger markets is great. Wages in Norway are high, which means that we must be highly productive to be competitive internationally.

Norway has some significant advantages we should exploit. We have competent and adaptive public and private sectors. Surveys show that Norway’s citizens trust each other and place a high level of trust in public authorities. The population’s use of digital media and their digital behaviour show that Norwegians are interested in new technology and are quick to adopt it. Up to 90 per cent of Norwegians have a broadband connection. Labour costs in traditional, labour-intensive industries are relatively high, meaning that we can profit from adopting labour-saving technology. The fact that our finance and telecommunications sectors are modern and efficient simplifies digitisation in other sectors.

The ICT industry is crucial for Norway’s value creation because it provides the basis for better and less expensive products in other industries, some of which are presented in this white paper. Therefore, we must ensure good framework conditions that can sustain our strong and innovative ICT industry. In a survey of 2,000 Norwegian business leaders, 76 per cent answered that development of new ICT solutions was increasingly crucial to their competitiveness.6 Forty-four per cent of the private sector’s total operating costs in R&D are related to ICT.7

The Government’s goals and ambitions

The Government’s primary goal is that Norwegian society take full advantage of the value creation and innovation opportunities that ICT and the internet offer.

It is not a question of whether more areas of society will be digitised, but rather when. We must therefore identify those areas of society that have the greatest potential for further development and that will face fundamental changes. It is important to ensure that these areas are digitised in an expedient manner.

Norwegian citizens will continue to use an increasingly wider range of new digital services. Enterprises and organisations will use technological advances to adapt to market and consumer demands and requirements by producing new and improved products and services. This trend will take place more or less independent of what the state does and how it facilitates these new developments. A policy that actively makes the transition from an analogue to a digital society can also give Norwegian businesses a competitive edge when entering international markets.

The Government wants Norway to be one of the leading markets for ICT-based services, to be a society whose citizens are online and whose market players know they can reach the entire population with their digital offerings. We want a public sector that demands digital services and solutions. We also want high levels of ICT research and ICT education. We want a digitally competent population that can use digital services safely and securely. We want an open and non-discriminatory internet. These, together with good data protection, high security, and trust in ICT systems, will form a sound basis for ICT-based value creation in future.

This white paper covers Norwegian society as a whole. Its policies and initiatives are aimed at individuals, organisations, public agencies, and business and industry. For society to reap benefits from further ICT developments, the ICT industry must supply the right solutions. The Norwegian ICT industry is therefore also a key target group for this white paper.

The Digital Agenda adopts a long-term perspective, as far ahead as 2020. In this white paper the Government proposes the main goals and outlines some specific priority areas. The Digital Agenda covers topics that many ministries, respectively, have responsibilities for. The policy goals and instruments in individual areas are described in more detail in the respective sections of this white paper.

The Ministry of Government Administration, Reform and Church Affairs has overall responsibility for following up and implementing the recommendations in this white paper.

1.2 ICT policy in a dynamic market

The authorities play several roles in ICT policy, and can adopt a wide range of policy instruments. The public sector regulates, assigns rights, and imposes obligations by means of laws and regulations. It allocates funds in some areas and collects taxes and duties in others. The public sector is a major procurer – and in some cases a supplier – of services. Common to all these roles is that public authorities operate in different markets: markets for ICT products and services, but – perhaps more importantly – markets created and shaped by technological advances.

ICT policy must take into account many different markets and market players with many special characteristics. The technology field is characterised by rapid changes in products, technologies, and suppliers. ICT has been instrumental in bringing about fundamental changes in existing markets such as the music, media, and finance markets. In addition, the global nature of the technology field means that a large proportion of products are produced in large volumes and for global markets, and are therefore reliant on international market conditions. A unified and long-term ICT policy must consider major changes and variations. It will therefore be vital to draw up some fundamental principles for how the state should operate in individual areas, for ICT policy, and for choosing between different policy instruments.

A policy that safeguards future business and markets

ICT can transform existing markets. New businesses may challenge existing ones. Government policy must facilitate the creation of new business activities and ensure that the interests of existing businesses and industries do not prevent further innovation.

Technology-neutral regulation

The authorities should normally not favour some technologies, processes, or production methods over others. Flexible, technology-neutral regulation makes it possible to create healthy competition in all types of markets – including markets that were not envisioned when regulation was being formulated.

Publicly available, international standards must serve as the starting point

Use of open standards creates flexibility and promotes competition. Because Norway is a small market, we must base our work on international standards if we are to benefit from the strong international competition to constantly supply better products at lower prices. Using these standards will give Norwegian actors access to export markets. We will actively participate in the ongoing work on international standardisation and on supporting open standards. We will take advantage of the public sector’s position as a major procurer to promote the use of open standards at the national level.8 Proprietary technologies that might restrict market competition should be avoided.

The roles of the public and private sectors should be clearly defined

One premise for successful innovation and enhanced value creation in Norway is that there must be a clearly defined distribution of roles and tasks between the public and private sectors. The framework conditions for private actors seeking to launch new, innovative solutions should be predictable, and a clear distinction should be made between the state’s role as public authority and the state’s role as owner.

The state should exercise caution in its market regulation

Since ICT markets are undergoing continual development, the public sector must be cautious about intervening in markets in a way that might prevent development and hinder innovation. Direct intervention should be called for only in cases where a market fails to work or develops such that important social values are compromised. The authorities should avoid ex ante regulation that would create obstacles to innovation and prevent new markets from developing.

Effective regulation

Public authority based on laws, regulations, and other provisions must be exercised such that available resources are used as effectively and expediently as possible. This entails selecting the regulatory tools best suited to achieving goals and avoiding unnecessary regulation.

The state should be able to contribute towards market development by stimulating demand

We will draw on the public sector’s own needs and on its role as a large-scale procurer to contribute towards reaping benefits inherent in new technological solutions in areas that need an influential actor to take the lead. For instance, the public sector can lead in using electronic invoicing in order to ensure faster implementation than would otherwise be the case.

The public sector will work towards achieving an open and non-discriminatory internet

The authorities will work to ensure that the internet continues to be a system that is open and that promotes innovation. The Government will facilitate competition between different developers and between different technologies to ensure sustainable business models and local freedom of choice.

1.3 About this white paper

The Government’s white paper on the Digital Agenda for Norway has four sections:

• I Norway online. In this section we describe how the Government will facilitate online access and top-notch broadband coverage for the entire population. This is an absolute prerequisite for implementing other initiatives. If citizens are not using the internet, there is no basis for providing digital services. The more citizens online, the more attractive it will be to develop and sell digital services. The high proportion of online users in Norway is thus a competitive advantage which the Government intends to exploit. This section of the white paper describes initiatives for organising good broadband services and for ensuring that these services are actually used.

• II The digital revolution. In this section we describe how the Government will facilitate and support value creation and digital reorganisation through favourable framework conditions and by paying particular attention to key areas which we consider to be on the threshold of a digital revolution. These areas have been highlighted because they are important for society and because public ICT policy is crucial for their future development. These criteria mean that some sectors (offshore and seafood, for example) are not mentioned, even though they are large and ICT is crucial for them.

• III Basis for growth. This section presents the core elements that must be in place to ensure a successful long-term ICT policy and value creation: leading-edge ICT competence, ICT R&D, and cyber security. We describe how we will ensure that Norway possesses the necessary ICT competence and R&D capacity to support digital development, and what policies the Government will adopt to ensure that ICT solutions are secure. This section also describes potential policy instruments for innovation and value creation.

• IV Implementation. In this section we describe how this white paper will be followed up. We outline the roles and responsibilities for implementing the policy and the economic and administrative consequences of the proposed initiatives.

1.4 The ICT sector

In terms of turnover, the ICT sector contributes significantly to Norway’s economy. The rate of value creation per employee is extremely high. Statistics Norway’s 2010 figures show that:

• Norway’s ICT sector had a turnover of NOK 202 billion, and value creation worth NOK 79 billion, which represents almost five per cent of total value creation in mainland Norway.

• In 2010, the ICT sector employed 74,000 people, which represents nearly 3 per cent of total employment in Norway, and more than the number of employees in the agricultural and fisheries sectors combined.

• ICT sector employment increased by 8 per cent from 2007 to 2010, a growth rate far higher than that of the economy in general. In the same period, total employment on mainland Norway increased by 2.4 per cent.

• Value creation9per employee in ICT was NOK 1,070,000, which is 50 per cent higher than for the rest of the mainland economy. By comparison, value creation10 per employee in large industries (such as building and construction, and manufacturing) was around NOK 700,000.

• The ICT sector comprised 11,200 enterprises, and 82 per cent of ICT employees were involved in services, including telecommunications and software manufacturing. The ICT industry, which produces components, hardware, and electronics, accounts for around 5 per cent of total employment in the industry.

It must be emphasized that delimitating this sector from the rest of the economy is difficult. Many sectors not included in the official statistics for the ICT sector nonetheless show significant ICT-based value creation and are often perceived as part of the ICT industry, such as enterprises involved in, for example, media and content production.