The Internet Value Chain 2022

This new edition of the Internet Value Chain report assesses the value of the internet ecosystem and its constituent parts — content rights, online services, enabling technology, internet access connectivity and user interface — and describes the trends and dynamics playing out across it.

Although the internet value chain is growing strongly, according to new data from global consultancy Kearney, the benefits and returns are flowing principally to players in the online services segment. Growth of online services since 2015 has been driven on the consumer side by the emergence of many gig-economy services and consumers shifting more of their entertainment spend to online services, including online gaming and video streaming services, while search and social media services have continued to grow strongly. On the enterprise side, there has been a strong, ongoing migration of on-premise IT applications to cloud-based services.

However, the telecom operators providing the connectivity infrastructure that underpins these services have generated relatively low and even single-digit returns on capital. Although the operators continue to invest in extraordinarily complex networks that enable the entire ecosystem, the low returns raise questions about the robustness of continued investment in coverage, speed and capacity, as well as in additional computing functionality at the edge. At a time when operator requirements to expand network capacity and extend coverage has never been greater, their business model is being squeezed.

This situation if it continues could hold back growth and innovation across the value chain. Policymakers therefore need to ensure that market distortions, regulatory requirements or other factors do not limit the ability of participants across the internet ecosystem to make sufficient returns, and that the right incentives are in place to realise the potential of technology and service innovation.

Download the report for a full breakdown.