Flora

In terms of the effect of competition policy, Dasgupta et al examines internet use in a panel of 44 countries over the period 1990-1997 assessing the impact on the ratio of internet hosts/telephone mainlines of measures including urban population, income per capita, and an index of competition policy79. They find that the ratio is

significantly and positively related to policy and percentage urban population, although income per capita was not found to be significant. Again this result is interesting from the point of view as to whether effective enforcement of competition policy could yield positive benefits for increased internet use. Chinn and Fairlie‘s results appear to confirm Dasgupta et al‘s finding of the ―regulatory factor‖ significance. For example, in a review of a panel of 161 countries over the period 1999-2001, Chinn and Fairlie find that variables such as GDP, telephone density and regulatory quality (as measured by an index assessing market-friendly policies) are important for growth in PC and internet density80. Wallsten in a review of a panel of 45 countries finds that the more formal and controlled a country‘s regulatory system, the fewer internet users and hosts81. In a separate study for the United Kingdom‘s Department of International Development (DFID)82, completed by the Author as part

79 _{Dasgupta S., Lall S., and Wheeler D., Policy Reform, Economic Growth, and the Digital Divide: An} Econometric Analysis, Development Research Group, World Bank, 2001.

80

Chinn M.D., and Fairlie R.W., The Determinants of the Global Digital Divide: A Cross-Country

Analysis of Computer and Internet Penetration, Madison, University of Wisconsin, 2004.

81 _{Wallsten S., Regulation and internet use in developing countries, AEI and Brookings Institution,}

Washington, 2003.

82

Collins H., Dixon M., Garthwaite N., Gillwald A., Groves T., Hunter J., Jensen M., Kariyawasam R., Lucas W., Milne C., Unadkat C., and Wirzenius A., Reducing the costs for internet access in

of a research team investigating the costs of internet access in developing countries in Cambodia, India, Nepal, South Africa, Uganda, and Zambia, the team found that generally the costs for internet access varied considerably among the case study countries, and were generally lower in the larger and more competitive ones83. Internet Service Provider (ISP) costs generally accounted for under half of end user costs in these countries, with telecommunication operator charges (especially for higher users) comprising the greater portion. The research team found that liberalisation and

regulation of telecommunications within DCs and LDCs, with a primary focus on effective competition for both international and domestic leased circuits and

permitting internet telephony would accelerate the growth of internet markets in these countries84. Other conclusions included:

 Liberalisation and regulation of telecoms within the developing countries, with a primary focus on effective competition for both international and domestic leased lines, and on permitting internet telephony;

 Sharing between developing country carriers and ISPs the revenues paid by users for calls to the internet;

 Making better use of scarce international bandwidth, for example by setting up local and regional internet exchange points and by caching content;

 Developing alternative lower-cost technologies, with a focus on wireless and cheap terminal equipment;

 Monitoring the competitive situation for the supply to developing countries of international bandwidth, and intensifying competition by helping developing country ISPs to get best available buys.85

The DFID Internet Costs study reveals that the main problem for many DCs and LDCs (at least in the case study countries) remains extreme poverty, leading to small markets and an inability to take advantage of economies of scale. The study authors recommend that increased internet take-up by businesses and institutions, better-off

Government (2001), Antelope Consulting, 2001, published on the internet at:

http://www.antelope.org.uk/telecommunications_development/DC_overview.pdf, accessed October 2008.

83

Ibid, Executive Summary.

84 _Ibid. 85 _Ibid.

personal users and telecentres will build market size and attract more effective competition wherever this is permitted. In a similar study conducted by the Author as part of an Antelope Consulting research team (including the Commonwealth

Telecommunications Organisation (CTO)) for the Department for Central and South Eastern Europe (CSEED) of DFID86, the team compiled information from the region on technical and regulatory structures87, and on the social utilisation of new

Information Communications Technologies (ICTs). The aim of the research was to inform CSEED‘s decision-making on how ICTs could be introduced and used in a more equitable and inclusive way. The team found that there was a much greater variation in the CSEE region than in Western Europe for telephone mainline density and internet use by capita. In 2000, telephone density ranged from 3 lines per hundred people in Albania to 37 in Slovenia. In Western Europe, the range at the time was 40 per 100 in Portugal to 68 per 100 in Sweden88. The Team also found wide differences in the geographical coverage of telecommunications (and therefore also internet access). In Western Europe both rural and urban areas had a near 100% network coverage, whereas in the CSEE region, urban coverage was good but rural penetration far from complete89. On average only 15% of rural households in the region had a telephone line. Romania, Albania and Poland all had several thousand villages with no network access at all90. No doubt these conditions have since changed, although the large differences in the levels of internet access and the wide range of country performance were due for the most part to low and varying economic achievement, although accession plans by a number of the countries to accede to the EU showed a willingness on the part of most of the countries to adopt EU policies in key enabling areas such as telecommunications. The research also indicated that the countries of CSEE were unequal societies with potential for social exclusion based on socio-

86

Lundy P., Stewart I., Souter D., Swain N., Milne C., Garthwaite N., and Kariyawasam R., Improving

the quality of transition in Central and South Eastern Europe through Information and Communication Technologies, Antelope Consulting for Department for International Development‘s Central and South

Eastern Europe Department, 2000, available on the internet at:

http://66.249.93.104/search?q=cache:IK2S4DYh0foJ:www.antelope.org.uk/telecommunications_devel opment/CSEED_report.pdf+CSEED,+antelope+consulting&hl=en&gl=uk&ct=clnk&cd=1&client=fire fox-a, accessed December 2010.

87

The central and south eastern European (CSEE) region defined for the purposes of this report included 15 countries: Estonia, Latvia, Lithuania, Poland, Hungary, Czech Republic, Slovakia,

Romania, Bulgaria, Slovenia, Croatia, Bosnia Herzegovina, Former Yugoslav Republic of Macedonia, Albania, and the then Federal Republic of Yugoslavia.

88

Supra note 76., Executive summary

89 _Ibid. 90 _Ibid.

economic group, ethnicity, sex and age, and that unemployment had greatly increased since the end of Communism, seriously affecting many groups, and especially the

Roma91. The use of the Internet also tended to be concentrated among the urban, educated (perhaps male) young, and that although Governments in the region had policies for the Information Society, the take-up of ICTs was mixed: Central Europe, but less so in the Balkans, they had made considerable progress in establishing a presence on the web. Interactive services were generally not available however, partly because of resistance to transition from paper-based, physically signed and rubber- stamped transactions92. Also commercial companies were responding rapidly to the new technologies, although, with the exception of vanguard software and e-commerce companies (of which most of the case study countries had a number), the picture was one of presence on the web rather than e-commerce. This was related to the low number of true credit cards used in the countries. At the time, the research indicated that areas for future development to make the Internet more accessible would include making telephone access cheaper, making electronic payment easier, providing public access points to the internet, and providing training in ICT skills and the English language.

Both of these DFID studies (also discussed in Chapter 7) appear to point to the adoption of more effective telecommunications, IP, competition, and trade laws to help address the Digital Divide. This is borne out through more recent research by UNCTAD. For example in the World Investment Report 2008, UNCTAD states:

As regards hard technology, in telecommunications for instance, market entry by international operators from both developing and developed countries has

contributed to lowering the threshold of access to and use of information and communication technologies in developing countries.93

Although, much of the research referred to above appears to point the way to increased flexibility in telecommunication policy possibly through the use of competition law in order to enhance IT penetration and internet use, it must also be

91

Ibid.

92 _Ibid.

stressed that many of the developed countries‘ national telecommunication

incumbents achieved their positions of market power over long periods of monopoly and that to suddenly open DC or LDCs national telecommunication markets to fierce competition in both basic and advanced services might not be the first step. For example, although DCs and LDCs may be willing to liberalise their national markets in order to attract increased foreign investment, they might also want to consider how legislative measures protecting those operators providing services of a general

economic interest, such as universal service/access or broadcasting obligations

(similar for example to the operation of Article 86 EC Treaty on liberalisation measures) might need to be implemented to protect domestic operators during a transitional phase to increased competition in the domestic market (Chapter 7 explores this issue in more detail).

The link here between telecommunications policy and competition and the digital divide indicates the significance of regulatory quality for growth in PC and internet density. Interest costs are lower in the larger and more competitive countries where liberalisation and regulation of telecommunications has led to more effective competition. Our definition of the divide therefore should include a reference to competition, as competition should result from increased liberalisation and deregulation.