Scope and classifications

23.117    The scope of the ICT satellite account is effectively determined by the range of products (goods and services) defined as information and communication technology. At the time, the satellite account was published the Working Party on Indicators for the Information Society convened by the OECD has produced a draft 'Classification of ICT Goods' and was working on a classification of ICT services. The ABS had significant input into this work and the classification used by the ABS in ICT Industry Survey (ICTIS) 2002-03 was broadly consistent with, but not identical to, the OECD classification as far as it relates to goods. The OECD definition included a broader range of goods than the Australian definition. The Australian definition only included ICT goods if they were able to be networked or were components of goods that could be networked. It also excluded a range of medical, scientific and audio visual equipment.

23.118    The scope of 'ICT industries' relates closely to the set of ICT products defined above. ICTIS 2002-03 was a major data source for the satellite account and covered the main industries involved in the production and distribution of ICT goods in Australia. Its scope was broadly consistent but not identical with the OECD ICT Sector definition. The Australian definition only included ICT products if they were able to be networked or were components of products that could be networked. Units that manufactured or distributed products such as industrial process equipment were included in the OECD classification but excluded from the ABS classification.

23.119    Within the 'ICTIS industries', businesses were further classified as either ICT specialists or non-specialists. Businesses in these industries were defined as ICT specialists if more than 50 percent of their income was derived from production of ICT outputs.

23.120    An alternative view was to group all similar activities together as an 'industry', regardless of whether the ICT products were produced as primary activities of businesses that were commonly thought of ICT producers, or as secondary activities of businesses that were not regarded as ICT producers. For example, ICT products such as software produced as a secondary activity by businesses (and government organisations) outside the ICT industries would be included. Likewise, non-ICT products produced by ICT specialist industries would be excluded. This leads to a wider definition of the 'ICT industry'. The disadvantage of this view is that estimates of ICT gross value added on this basis require use of assumptions because it is not possible to collect all the required information on the costs of producing ICT products or the value of output.

23.121    This wider activity concept of an ICT 'industry' is clearer in practice where it involves actual sales of ICT products. Defining the boundary becomes more complicated where ICT goods and services are produced in-house for own use. For example, a bank (classified to the financial services industry) may use its own employees to provide help desk services, data processing, system maintenance and software development, etc., or it may purchase these services from other businesses. Where these services are purchased, and regardless of the source of the purchase, they become part of the economy-wide ICT industry for inclusion in the satellite account. In the national accounts, goods and services produced for own use are not regarded as part of output where they are consumed as part of the process of producing other goods and services. In that case, their value is reflected in the other outputs of the business; in this example, financial services. In-house ICT products are included as products in their own right in the national accounts, being products in the nature of gross fixed capital formation (e.g. software development).

23.122    In principle, the scope of the ICT satellite account could conceivably be defined to include all ICT activity including in-house activity. Using the above example of a bank, help desk activities could be separately valued and included as part of ICT output and value added. The services would be deemed as being both 'sold' and then 'purchased' by the bank for input to the production of financial services. This quickly becomes an artificial construct. Businesses make different decisions about which functions to outsource and which to provide in-house across a whole range of activities, including accounting, payroll, transport, storage, recruitment and so on. In practice, it is not possible to collect the information required or to satisfactorily value such activities provided in-house.

23.123    An 'economy-wide' scope was adopted in the satellite account. ICT products produced in-house for own use were excluded from the output and use of ICT products, apart from in-house production of ICT capital goods (software and telecommunication assets).