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Thursday, November 16, 2006

UN Report on Broadband Misses the Mark
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Today the United Nations issued a 346-page document decrying the state of Internet access in developing countries. In the foreward, Secretary General Kofi Annan writes that "People in developing countries need cheaper and easier access to ICTs [Information and Communications Technologies]. They need enhanced ICT skills to better employ these technologies in their homes, schools, and jobs. And they need the freedom to create, share and exchange information and knowledge of all kinds." The report argues that every country needs a national ICT policy and outlines a "model ICT policy review framework."

Even if Mr. Annan is correct (a big assumption, as people in developing countries "need" things like clean drinking water more than they "need" the Internet) the report is unlikely to help achieve the goal. Even if its recommendations were adopted they would be unlikely to do any good.

Developing countries do not lag in Internet and broadband adoption because they lack national ICT policies. They lag because they are poor, because government regulations discourage investment, and because entrenched interests -- typically state-owned incumbent telecommunications companies or privatized monopolies -- make entry by competitors difficult.

I wrote an op-ed on this a few years ago and last year an empirical paper I wrote on this subject was published in the journal Economic Development and Cultural Change. My research revealed that countries that regulated Internet access had fewer Internet users and higher prices.

The brightest spot in economic development is the astounding growth of mobile service in even the very poorest countries. How did this happen? Not through any national mobile service promotion policies. Indeed, a half-century of government-, World Bank-, and other donor-funded telecom projects had almost no impact on telecom networks in developing countries. Instead, the mobile revolution happened because incumbent monopoly telecommunications providers (and I use the term "provider" loosely, since for decades they rarely supplied much in the way of telecom services) thought that mobile service would never be lucrative and did not recognize it as a threat to their business. As a result, they did not block market liberalization and allowed private firms to enter the market. By the time they realized their mistake, it was too late -- mobile service provided by private firms and entrepreneurs had come to stay. The billions of people in developing countries are much better off as a result.

The lesson is that big, top-down national ICT policies are not the way to go. Countries should instead focus on encouraging competition by liberalizing market entry and eliminating arbitrary regulations that do little more than make it difficult for entrepreneurs to invest.

[If your eyes aren't glazing over yet, click here for links to some of my research on telecom in developing countries]

posted by Scott Wallsten @ 2:54 PM |

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