Report on the internet economy IV. 2002 (Summary for the press)
2002. 12. 17.
The GKI-Westel e-Economy Index, reflecting the role of the internet in the business sector and the expectations of the corporate sector, was at 6.7 in the fourth quarter of 2002. The significant drop in the index interrupted the upward trend in confidence toward the internet economy over the previous quarters. Expectations were low across the board, with the smallest decline in the financial sector. The decrease in the index coincided with a significant drop in the general business expectations of corporations. GKI’s business confidence index also started to plunge in late 2002.
According to the results of the quarterly survey conducted by GKI Economic Research Co. in association with Westel Mobile Telecommunication Co. and Sun Microsystems Hungary, internet access in the category of domestic firms with more than five employees increased to 82% from 72% a year earlier. Broadband connections, particularly ADSL lines, continue to be increasingly popular with a wide range of companies, largely at the expense of dial-up connections. The percentage of ADSL users more than doubled over the past year. Currently, 17% of businesses with 5+ employees access the internet via ADSL.
27% of companies that have internet access plan to increase bandwidth over the next year.
II. Detailed report
1. General decline in business activity
As in numerous other research projects of GKI Economic Research Co., the results of this survey are synthesized in one index, called the GKI-Westel E-Economy Index.
This sentiment index, representing the expectations of certain segments of the economy regarding the market impact of internet use and internet applications, is comprised of responses to four questions. The questions relate to the following issues: expectations regarding internet sales and procurement, the impact of the internet on the market of the company, as well as the utilization of the internet in the present and in the future.
The GKI-Westel E-Economy Index, an indicator synthesizing the expectations and attitudes of economic actors regarding the internet and various electronic business applications, dropped substantially in the fourth quarter of 2002, in contrast to the upward trend in confidence seen earlier in the year. The decrease in the GKI-Westel E-Economy Index coincides with drops in the general business sentiment index and the consumer confidence index alike, both of which started to tumble in late 2002 and have been on a downward trend since then. As a result of weaker economic expectations, corporations are more cautions in their outlook for electronic and internet business operations, signaling that only a few companies have an escape plan in the face of a shrinking market.
Note: The GKI business confidence index is based on the value measured in the final month of the quarter.
Companies believe that, contrary to their previous expectations, the increasing prevalence of the internet has a less significant impact on their business operations, and they will less likely use it as a substantial new channel in sales and procurement.
The retail and wholesale sector suffered the highest rate of confidence loss in the four categories featured in our reports (general corporate segment, financial sector, tourism, retail/wholesale trade), while the financial sector saw the slightest deterioration.
2. Internet access: lagging sectors
82% of companies with five or more employees had internet access in early 2003. This reflects an increase of approximately ten percentage points from the same period of the previous year. There are two underperforming areas as far as internet penetration is concerned: the entire agricultural sector, as well as smaller businesses in the restaurant sector. The low development level of the agriculture sector in terms of access to IT tools, utilization and IT skills obviously deteriorates the competitiveness of the sector, and it has a negative impact on the sector’s absorption capacity to accept and manage EU funds following accession.
A further 9% of companies are planning to get internet connection within the next year. If these plans materialize, nine out of ten companies will access the world wide web on a regular or occasional basis, which is equal to the Western European average.
As far as internet connection types are concerned, the trends seen over the past one and a half or two years continued during the recent quarter: the percentage of dial-up connections declined further, while the penetration of ISDN-based connection types remained basically unchanged (19% of businesses use the former type, and 51% use the latter.) Broadband technologies (particularly ADSL offered by a significantly greater number of providers) are becoming increasingly popular in the household and corporate segments alike. 17% of all companies subscribed to ADSL or BDSL services in the fourth quarter of 2002, significantly more than projected on the basis of expectations a year earlier. 13% of the companies have leased lines, and 6% use cable TV connection. 27% of businesses with existing internet access are planning to expand bandwidth over the next year.
4. About the research methodology
The survey was conducted over the period of January-February 2003, covering all corporations with over fifty employees and a sample of 50% of businesses with 5-50 employees in a breakdown by the number of workers and by sectors. The report was based on the responses of 1,800 companies across the entire country, weighted appropriately to be representative of the composition of the corporate segment in terms of company size and economic sector.
GKI Economic Research Co. – Westel Mobile Telecommunications Co. – Sun Microsystems Hungary.