Omdia/FT Digital Economies Index 2022
The FT-Omdia Digital Economies Index is a statistical analysis of the world’s leading digital economies from 2022 to 2026.
FT-Omdia Digital Economies Index
2022
Introduction
Productive digital economy performance is tethered to a country’s tech foundations
World economies, buffeted by political instability, fragile supply chains, labor shortages and, in the case of China, a zero-COVID strategy, are undergoing a transformation. The race to digitalization has heated up, with many nations investing heavily in 5G, fiber rollout, AI, security and other hallmarks of technology infrastructure. While many market watchers, investors, national regulators and politicians rightly seek to position their nations as leaders in emerging technologies, Omdia and the Financial Times argue that productive digital economy performance is tethered to a country’s technology foundations in the latest edition of the FT-Omdia Digital Economies Index. Our research, now in its second year, is based on a deep understanding of the digital infrastructure fundamentals of over 50 of the world’s leading economies.
And what are these foundations? First and foremost, connectivity. Without a connection, the power of cloud-based consumer and business services is rendered non-existent. Communications and connectivity (fixed and mobile broadband) are the foundations of the foundation. On top of this come devices (smartphone connection, IoT, Notebook, tablet and PC connections, as well as TV households).
These allow access to digital services, whether business-related (cloud and overall ICT intensity in the business segment) or consumer-driven (online entertainment, use of social media). We also present and analyze digital payments data in all markets to better measure the level of digitalization at the point of consumption.
The FT-Omdia Digital Economies Index is a composite index, based on statistical analysis of the world’s leading digital economies from 2022 to 2026. Prepared by Omdia’s expert analysts, the Index is a unique tool to assist in strategic decision-making processes that includes 51 countries representing five major world regions: Asia-Pacific, Europe, Latin America, Middle East/North Africa and North America.
Using the Index, the Omdia team has compiled key highlights and trends in connectivity, devices & IoT, Enterprise IT, financial services and entertainment that will:
1. Assist in the understanding of the size and growth of the leading digital economies, markets and measures,
2. Identify opportunities and key trends in major technology segments that will impact these leading digital economies and,
3. Identify economies offering the greatest scope for growth.
We hope that the FT-Omdia Digital Economies Index will contribute to positive improvements in digital product and service consumption worldwide.
For more information on the methodology used to prepare the Index, and to see the full Index across a series of interactive dashboards, please click here.
Evan Kirchheimer, Research Vice President, Service Provider, Omdia
Richard Mahony, Vice President, Service Provider, Informa Tech
Key themes for 2022 and beyond
Alternative payment methods will become mainstream
Alternative payment methods such as crypto, account-to-account, and QR payments are increasing in importance.
The metaverse
Meta has built plans which rely on a new device format and massive growth in connectivity quality. Do their plans stack up?
Hyper-scalers everywhere
Internet players are growing rapidly in all entertainment categories but are they too dominant?
Edge - workloads on the move
Edge remains a massive potential new market and could see the reemergence of the telco as a key partner in the ecosystem.
The rise of green clouds (again)
The cloud as an environmentally sustainable option in companies’ emission calculation is back on the agenda.
Fiber to everything
Fiber to the home, fiber to the room – physical connections continue to grow with political and economic forces at play. Europe/UK laggards are finally entering a period of more rapid growth. China and Southeast Asia are leading the digital economy with deepest fiber penetration >90% of households.
5G
Most regions see a rapid adoption of 5G over the next 4 years, but consumers are reluctant to pay a premium. If so, how can operators drive new revenues?
New device formats – AR & VR
Growth in device ownership will move away from traditional devices such smartphones and PCs. Automotive is the next major battleground.
Music rises, video falls
Markets that were lost to music are now becoming digital. In comparison, video markets are oversaturated, meaning more adverts.
Hyperscalers expand into IoT connectivity
Hyperscalers will explore alternative connectivity options and push into areas traditionally controlled by the telcos. Hyperscalers will alter the face of the IoT ecosystem as they build out there models to connect everything.
Emerging Markets
**Mike Roberts**, Principal Consultant - Service Provider
Key observations for emerging markets
Countries to watch 2022-2026
Vietnam
Vietnam will have the strongest digital growth over the forecast period of all the 51 countries in the Index, with a weighted CAGR of 8.9% from 2022 to 2026.
India
India will not only record the second-fastest digital growth of 8.7% from 2022-26 but will also maintain its position as the third-largest digital economy over the period, behind only China and the US.
Mexico
Mexico will record the third-highest digital growth of countries in the Index, with a weighted CAGR of 8.1% from 2022 to 2026. It will maintain its position as the thirteenth largest digital economy throughout the period.
Indonesia
Indonesia will see a digital growth of 7.7% from 2022-26, the fourth-highest in the Index. That strong growth will lead Indonesia pass South Korea in 2025 to become the ninth-largest digital economy in the Index.
Key gaps to bridge
Key growth drivers/inhibitors
- Emerging markets lead growth - Even more so than in developed economies, key emerging markets have turned increased digital investment during the pandemic into a post-pandemic boom in digital growth – one which Omdia forecasts will continue through 2026.
- Digital policy inclusion challenges - Challenges to digital growth in emerging markets include government policies that can hinder rather than support digital infrastructure and investment, and ensuring that digital connectivity, services and opportunities are widely available.
- Vietnam leads across segments - Vietnam will see the fastest growth of all economies in the Index in both connectivity and devices & IoT, with a CAGR for 2022-26 of 7.5% and 8.8%, respectively. Vietnam also ranks second in growth over the period in entertainment, and third in payments.
FT Omdia Digital Economies Index – Connectivity Growth
4. India's telcos weather pandemic - In 2021, India’s economy showed signs of a post-pandemic revival, on the back of easing government restrictions and shops reopening. The telco sector, the key provider of digital connectivity, remained largely resilient in the face of COVID-19.
5. Mexico strong in Enterprise IT - The enterprise IT market in Mexico will grow 12.4% from 2022-26, the third-highest rate in the index, spurred by a 17.2% growth in cloud spend over the period. Mexico will also see robust growth of 7.8% through 2026 in devices & IoT.
6. Indonesia returns to growth - Omdia is forecasting that Indonesia’s digital markets will see strong growth through 2026, following recent signs of broader economic recovery including the 5.01% year-over-year (YoY) growth of Indonesia’s GDP in 1Q22 compared to 1Q21.
FT Omdia Digital Economies Index – Devices & IoT Growth
Vietnam targets 100% smartphone penetration by 2023
The Vietnamese government has stated its ambition to achieve 100% smartphone penetration by 2023, which will significantly accelerate both digital connectivity and the use of digital services. Furthermore, e-commerce has been significantly gaining traction across the country, including in rural areas, accelerating the trend. Local telecommunication operators Viettel and VNPT have also launched digital financial services (mobile money) to complement its telecommunications business and various other businesses.
Vietnam is also one of the key markets for foreign direct investment in South-Eastern Asia, especially for the manufacturing industry. This will help to increase digital investment and growth in one of the largest industries in the country.
5G launching in India in 2022, will account for 30% of mobile market by 2026
Launching in India in 2022, 5G will account for more than 20% of mobile subscriptions in the country within three years; 4G took five years to reach that level of penetration. Omdia is currently forecasting that there will be 370 million 5G subscriptions in India by the end of 2026, representing close to 30% of the mobile market.
In the consumer segment, 5G adoption in India will benefit from the fact that an increasing number of mobile subscribers have smartphones that support 5G, even before 5G commercial services and network coverage have launched in the country.
In addition, Omdia recently conducted a survey of 316 enterprises in India that shows companies are ready to adopt 5G services, with 52% saying they want to start using 5G services in 2022 or 2023 and another 31% expecting to use 5G in 2024.
Mexico’s IFT takes aim at digital divide, but more initiatives needed
In Mexico, as in many emerging markets, Omdia believes that more regulatory and public policy initiatives are required to expand telecoms network coverage, which would in turn reduce the digital divide in the country.
The country’s telecoms regulator – the Federal Telecommunications Institute – has issued a new set of guidelines for the deployment, access, and shared use of telecom and broadcasting infrastructure that would go a long way toward reducing the rural–urban disparity in the country.
However, the government should also ensure sufficient fund allocation to the sector through its annual budgets as there is a lack of proper connectivity in the remote and rural parts of the country.
Indonesia telecoms market maintains growth trajectory
In 2022, despite major global crises, such as the Russia-Ukraine war, rising inflation rates, and supply disruptions, Indonesia’s telecoms market remained robust, leading Omdia to maintain its forecast for growth in the country’s mobile and fixed broadband markets.
Also in 2022, all operators in Indonesia announced their plan to accelerate the migration of 3G users to 4G, and to upgrade their network assets to cope with the increased demand for data. This will lead to increased data consumption and data service revenue over time.
Indonesia is seeing ongoing growing demand for fixed broadband services, with service providers continuing to expand their fiber footprint.
Omdia recently conducted a survey of 316 enterprises in India that shows companies are ready to adopt 5G services, with 52% saying they want to start using 5G services in 2022 or 2023 and another 31% expecting to use 5G in 2024.
FT-Omdia Digital Economies Index - Country by Total Growth, 2022 - 2026
Mike Roberts
Principal Consultant, Service Provider mike.roberts@omdia.com
Fixed Broadband
**William Hare**, Practice Leader – Service Provider Markets Europe
Key observations for fixed broadband penetration
Countries to watch 2020-2026
UK
The UK is a laggard in FTTH, but now hundreds of operators are engaged in a land-grab to roll out infrastructure.
Italy
The 2 main fiber companies in Italy have signed a preliminary agreement to merge, forming a single national network.
Brazil
Other than China and the US, nowhere will add more fiber subscriptions than Brazil over the next 5 years.
USA
The USA lags behind other developed markets in fiber take-up, but the government is investing $25bn in fiber roll-out.
Key gaps to bridge
Key growth drivers/inhibitors
- Change in working patterns - As the world emerges from the pandemic, the shift towards homeworking has been brought forward by several years, fueling demand for fast and reliable home broadband connectivity.
- Regulation of incumbent operators - Regulation is required to ensure a level playing field between new and established operators. Rollout of fiber is cheaper with regulated access to existing passive infrastructure such as ducts and poles.
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Rural broadband support - Governments are keen to close the digital divide by subsidizing fiber rollout in rural areas, where commercial rollouts are unlikely to be profitable.
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Fixed-mobile convergence - FMC can be a good way of driving fixed broadband take-up. Established mobile operators who are entering the fixed market can market FMC packages to their existing mobile customer base.
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Vendor collaboration - Some vendors are seeking to collaborate closely with network operators in broadband rollout, as a means of building long-term strategic partnerships, especially in emerging markets.
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Demand for streaming services - Online video content is a key driver for broadband take-up, both from established pay TV providers and from local and international OTT players such as Netflix or Amazon Prime.
Fiber rollout is essential to support the new economy
Home-working was a growing phenomenon in developed economies before COVID-19 arrived, but the pandemic has accelerated this trend by several years. White-collar workers across most industries can now expect to be working from home at least part-time, and they need the infrastructure to support this. The increased use of video conferencing requires fast and reliable connectivity in both the uplink and the downlink. Meanwhile the demand for video streaming continues to drive record traffic levels. Although mobile networks can support high speed Fixed Wireless Access as an alternative to copper or fiber, they cannot deliver the necessary capacity to support home broadband services for the mass market in most contexts.
The benefits of fiber go beyond raw speed
Fiber broadband offers faster download speeds than copper or cable alternatives, and this is a key selling point for the technology. But it brings other benefits that are arguably more important for users. In particular, fiber offers a much more stable connection than copper (as it is less susceptible to interference), and a lower latency service (which is vital for real-time services such as video conferencing and gaming). Another overlooked area is the importance of Wi-Fi – a poor quality home Wi-Fi setup will become the weak link in the chain if it fails to match the performance of the broadband connection itself.
Government intervention is needed to close the digital divide in rural areas
Rollout of fiber in high-density urban areas is a commercially viable prospect in most scenarios, and the market will typically support several competing infrastructures. But in rural areas the cost of rollout is prohibitive, and rollout is reliant on government subsidy. Fiber rollout is especially urgent in rural areas, which suffer from worse existing services than in urban areas, because of a lack of cable coverage, and poor DSL speeds (because of the longer length of copper loops, which attenuates the signal). Mobile coverage is also generally worse, which further reduces the options for rural customers. If users in these areas are not to be left behind then intervention is required to bridge the digital divide.
Fiber and 5G are complementary technologies
5G can offer an alternative to fiber in some circumstances, notably for very remote rural premises in difficult terrain (e.g. in mountainous areas). But for higher density areas the 5G network will struggle to provide enough capacity without the widespread deployment of small cells, which in turn are dependent on fiber backhaul. Thus although 5G cannot be a full substitute for fiber broadband access, the fiber network is an important part of the 5G landscape. This favors integrated operators, who can use a single network to support both fixed and mobile customers, as well as offering bundled FMC packages as a means to build customer loyalty and reduce churn.
Supplementary key theme forecast and data – fixed broadband
Fiber % of broadband subscriptions by region, 2022 & 2027
Source: Omdia
Fiber subscriptions forecast by region (m)
Source: Omdia
"Europe and North America are the leading growth markets for fiber broadband."
Internet penetration of households (all broadband tech)
Internet penetration of households (all broadband tech)
William Hare
Practice Leader – Service Provider Markets Europe william.hare@omdia.com
5G / Mobile
**William Hare**, Practice Leader – Service Provider Markets Europe
Key observations for 5G mobile penetration
Countries to watch 2020-2026
Switzerland
Swiss operators have achieved near-universal 5G coverage using DSS, and uptake is among the highest in Europe.
India
India has been slow to get started with 5G, but the sector is poised to take off with the first launches due by October 2022.
Brazil
The recent 5G spectrum auction in Brazil brought several new players alongside the existing operators.
Taiwan
5G is booming in Taiwan, driven by government investment and a favorable regulatory environment.
Key gaps to bridge
- 5G network deployment is very costly, but the path to monetizing the investment is not clear. Ordinary mobile users are reluctant to pay a premium for 5G over 4G, so operators must look to new services in order to gain any incremental revenue from 5G.
- Post-pandemic the world economy is entering a period of high inflation, which will squeeze operators’ margins. Digital transformation is the key to reducing operating expenses (OpEx), and operators should accelerate this, and switch off legacy networks as soon as possible.
Key growth drivers/inhibitors
- Availability of 5G spectrum - 5G-suitable spectrum is a scarce resource. Governments and regulators must manage it effectively to ensure operators have the bandwidth they need to supply high-quality coverage, while maintaining a competitive market.
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Regulatory support - 5G rollout is expensive, and operators can reduce costs by sharing infrastructure or through consolidation. But this requires approval, and regulators have to balance the benefits of reduced costs versus loss of competition.
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Access to network equipment - Supply chain issues for chipsets and network equipment have been exacerbated in some regions by restrictions on the choice of vendors for political/national security reasons. This can make 5G deployment slower and more expensive.
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Dynamic Spectrum Sharing (DSS) - DSS enables operators to deploy 5G rapidly using existing 4G frequencies. Compatible antennas switch dynamically between LTE and 5G according to demand, enabling the use of 5G without switching off 4G.
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Private networks - Dedicated private 5G networks for enterprise customers (e.g. for large industrial campuses) are a key new revenue opportunity. Spectrum ownership is crucial and may allow vendors/enterprises to bypass the established network operators.
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Core network investment - The 5G radio access network (RAN) is only part of the 5G ecosystem. Early 5G deployments are built on existing core infrastructure, but the more interesting 5G use cases depend on standalone 5G deployments, with a whole new core supporting the RAN.
The implications in the digital economy
Control of spectrum assets is a key battleground in the 5G ecosystem
The ownership of 5G spectrum licences is critical to all aspects of the 5G industry. Governments and regulators have a key role to play in ensuring that frequencies are made available and allocated optimally. Delays to spectrum auctions have inhibited 5G rollout and uptake in a number of countries (e.g. Portugal), with knock-on effects for the whole digital economy. A well-designed auction will ensure that the largest players have sufficient spectrum to deliver high-quality national coverage, while opening the market to competition from newer innovators. 5G private networks also require spectrum licences, which can be owned by a variety of players – network operators, vendors or enterprise users. A secondary market for spectrum can lead to more efficient use of this scarce resource.
Digital transformation is essential for the full benefits of 5G to be realized
Although its superior headline speed has been 5G’s key selling point, in reality its benefits are much more complex. For most existing users, the speeds offered by 5G are more than adequate. But 5G offers several other advantages over 4G – e.g. lower latency, greater energy efficiency, and support for a much greater number of connections. These characteristics will facilitate new use cases, notably in industrial IoT and AI. But to realize these benefits, operators must undergo a full transformation of their existing networks. The aim should be to accelerate the decommissioning of inefficient legacy systems and platforms, which will deliver significant OpEx savings through reduced maintenance, lower energy costs and headcount reduction. These benefits will be critical as the impact of high inflation takes hold.
5G monetization remains a key challenge
In the early stages of 5G deployment, operators were able to charge users a premium for the service, which was targeted at high-end tech-savvy customers. This is no longer the case as 5G reaches the mass market, and because of competitive forces keeping prices down. Operators seeking to increase ARPU with 5G must instead use it as a means of persuading users onto a higher tariff band, with larger data allowance and/or more bundled services. 5G device affordability also presents challenges, but operators can counter this with well-designed subsidy models.
Governments must ensure the conditions are right for 5G success
Governments and regulators have several vital roles to play in establishing a flourishing 5G market. In particular they need to strike a balance between ensuring markets remain competitive, and making sure 5G rollout is efficient, cost-effective and secure. This applies in many areas – in the allocation of spectrum, in authorizing network sharing schemes, in approval of M&A activity, and in regulation of the network equipment market. Restriction of the use of “high-risk vendors” for reasons of national security will increase costs and delay rollouts.
"Governments and regulators have several vital roles to play in establishing a flourishing 5G market."
5G % of mobile subscriptions by region, 2022 & 2027
Source: Omdia
5G subscriptions forecast by region (billion)
Source: Omdia
"Developed markets will lead the way with 5G, and the bulk of the opportunity is in Asia."
William Hare
Practice Leader – Service Provider Markets Europe william.hare@omdia.com
Music
**Simon Dyson**, Senior Principal Analyst - Music and Digital Audio
Key observations for on-demand audio subscriptions
Countries to watch 2022-2026
China
Already a market leader in music subscriptions, the country will lead global growth for years to come.
India
Holds a massive total addressable market size and has the potential to eclipse the global leaders.
Nigeria
Music companies now recognizing the potential for growth in Africa’s most populous country.
Saudi Arabia
Leading market in a region that has had no viable recorded-music sector for record labels and publishers.
Key gaps to bridge
- Although the countries to watch are all emerging markets, the same issues faced by more developed markets surrounding consumers’ willingness to pay apply. However, where music services face greater difficulties in those emerging markets is convincing consumers to pay for something that has always previously been free.
- Willingness to pay can be heavily influenced by the subscription price. It must be low enough to attract users, but not so low that rights holders are short-changed. Service provision can go a long way to convincing users to pay but again a music service should not go too low as that will simply devalue the offering and not create a longer-term proposition.
Key growth drivers/inhibitors
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Enabling the “emergers” - Until recently there was little incentive to pay for recorded-music as everything was available from the pirate sector. Now, countries that were previously lost to the industry are starting to generate meaningful levels of income.
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Return on investment - Music companies need to know that they will see a return on artist investment. Streaming has enabled this in countries that were previously piracy-dominated. Also, generating an investment return cycle can only be good for future growth.
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Bundling opportunities - Mobile music bundling played a big part in the early years of subscription growth in developed markets. Mobile operators can be central to the uptake in music subscriptions in the less developed markets.
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App compatibility - Mobile will only be key to music service growth if the access apps are compatible with handsets. This can be a problem in countries where consumers do not have such sophisticated handsets.
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Local vs. international - Local streaming services can be a better option for consumers that want access to local talent. Although the international giants will also be able to provide a platform for local artists, these services may concentrate on global favorites which could be to the detriment of local repertoire.
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Service take up - Getting the price right is crucial to service take up. Charge too much and consumers will be put off. Set too low a price and the economics of streaming with the different rights holder payments will be difficult to achieve.
Maintaining the emerging market progress
Anyone involved in any part of the music industry will acknowledge the importance of emerging markets in terms of long-term global growth. For recorded-music, developed markets will reach saturation point for music subscriptions and so on a global level, emerging markets will be key to maintaining the current growth momentum. The role of subscriptions and streaming cannot be overstated. So many markets had been completely lost to piracy in the hard format and download days. But music access has the potential to invigorate territories, or in some cases, create a whole new revenue stream. Although some are already emerging, there are no guarantees that countries previously dominated by unlicensed music will live up to their billing, but the signs, so far at least, are very positive.
Delaying the developed market subscription stagnation
A look back at the last five or so years at the progression of music streaming and subscriptions in developed markets will show a slowdown in growth. Historically, the recorded-music sector has relied on format replacement to maintain growth, with a new format replacing an old favourite. Although the format cycle is effectively at an end, music companies must act to ensure that the sector does not stagnate as subscriber numbers close in on a take-up ceiling. Not enough attention has been paid to the question of what happens next Although a few markets have seen price rises, greater experimentation with pricing needs to happen along with new models of service provision.
Making mobile music pay
The mobile handset has become central to the rollout of music subscription services. Every service has an app and rates of music playback through mobile devices is high. Mobile operators in developed markets played a key role in boosting subscriber service take-up. Now they act mostly as a promotion vehicle for music services. Less developed markets have an opportunity to replicate the success of developed markets and involve mobile operators to get closer to consumers. Services should be bundling with mobile operators and offering reduced rate access to the music services.
Tailor service offerings to a new music market
If a criticism can be made of music subscription services, it is that they concentrate too heavily on internationally successful artists at the expense of local repertoire. Since the advent of streaming, repertoire consumption has increasingly favoured international artists and the share of total music consumption for local repertoire has fallen. Consumers are clearly interested in global superstars and streaming rates confirm this interest. But there is also a market for national success stories and services should use local artists more as a differentiator in what has become something of a homogenised sector.
Music subscriptions generating an increasing share of the recorded-music revenue pie
Recorded-music retail sales by source
Source: Omdia
Recorded-music retail sales by source share
Source: Omdia
Simon Dyson
Senior Principal Analyst Simon.Dyson@omdia.com
Online Video
**Tony Gunnarsson**, Principal Analyst - TV, Advertising & Video
Online Video Subscriptions
Countries to watch 2022-2026
China
China is now the world’s largest SVOD market, set to surpass 500 million subscriptions in 2026.
USA
Despite early maturity and saturation, US market will still grow by +85 million subscriptions over the next 5 years.
India
While far behind the US and China in terms of market size, India is the world’s third largest SVOD market.
Brazil
The Brazilian SVOD market is projecting strong growth, Omdia expects +30 million new subscriptions over the next 5 years.
Key gaps to bridge
Key growth drivers/inhibitors
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SVOD churn & seasonality - SVOD is globally popular (cf. Netflix), but the model promotes seasonality: households regularly alternating between services. Growth is now dependent not just on acquiring new subscribers but managing churn and subscriber retention.
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The return of advertising - Key future growth for TV and video will come from ad-funded video streaming platforms (AVOD/FAST). The next 5 years will likely be a period of experimentation for SVOD, with many services testing hybrid AVOD/SVOD t
