ICT and Economic growth

1
ICT andEconomic growth

• Jean-François Soupizet
• Head of International Relations
• DG INFSO, European Commission
• Milan, 11 December 2006

2
Contents

• Introduction
• I. ICT and economic growth EU vision and
  international debates
• II. Definition and measure of the digital
  divide
• III. The factors of development of the access
  to the electronic communication networks
• IV. The issue of access
• Conclusions
• Prospects

3
ICT and economic Growth

• The ICTs are at the heart of the European
  strategies for growth and employment (Lisbon
  strategy i2010 initiative)
• The ICTs are recognised for their potential in
  socio-economic development by the WSIS
• The digital divide is synonymous with insulation
  of economic, scientific and cultural flows and a
  limitation of inter personal communications of
  the citizens.

4
i2010 A European Information Society for growth
and employment

• Launched by the Commission on 1 June 2005 as a
  framework for addressing the main challenges and
  developments in the information society and media
  sectors up to 2010.
• Promotes an open and competitive digital economy
  and emphasises ICT as a driver of inclusion and
  quality of life.
• Contains a range of EU policy instruments to
  encourage the development of the digital economy
  such as regulatory instruments, research and
  partnerships with stakeholders.
• i2010 - the first substantial initiative taken
  under the renewed Lisbon agenda - seeks to boost
  efficiency throughout the economy through wider
  use of ICTs.

5
i2010 the 3 pillars

• 1) Creating the single European Information
  Space, which promotes an open and competitive
  internal market for information society and media
  services.
• 2) Increasing investment in innovation and
  research in ICT.
• 3) Fostering inclusion, better public services
  and quality of life through the use of ICT.

6
The international debates

• ICT international issues gave rise to numerous
  national and international debates
• - In a sectoral context (the missing link) the
  conferences of development of telecommunications
  on the initiative of the ITU (1992..1998..2002)
• - In a broader context (the information society)
  the G8 (June 2000), the United Nations General
  Assembly, the World Summit on the Information
  Society (Geneva, December 2003 Tunis, November
  2005)

7
World Summit on Information Society (WSIS)Tunis
November 2005

• Summit has outlined a consensus for a global
  approach to the Information Society.
• Summit reaffirmed the primary importance of
• Respect for human rights, freedom of expression
  and democracy
• Contribution of ICTs to Development and notably
  to reach the MDGs
• Cultural diversity
• Market economy for the develoment of teh
  Information Society
• Balanced agreement reached to bridge the digital
  divide and support vulnerable groups (elderly,
  people with special needs).

8
WSIS follow up

• Compromise found on Internet Governance
• Enhanced cooperation to enable governments to
  carry out their roles and responsibilities in
  international public policy issues pertaining to
  the Internet
• Creation of Internet Governance Forum, a new
  forum for multi- stakeholder policy dialogue
• Involvement of all stakeholders
• Private sector
• Civil society organisations
• Preference for an open process

9
The digital divide in questions

• Definition and measure
• What is the DD?
• How to measure it and what is its dynamic?
• The factors of development of access to the
  electronic communication networks
• Incomes, time, technological progress and the
  structure of the markets
• Can the liberal model ensure the development of
  the infrastructures?

10
The digital divide in questions

• How is the offer of services financed
• - Public financing to the private model,
• - New commercial and technical regulations
• - The demand
• A new prospect low cost services
• - Examples of low cost communications services
• - Collective access, a model from the South?

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II. Definition and measure of the digital divide

• Definition the disparities between individuals,
  hearths, companies and geographical areas, at
  various socio-economic levels, in terms of access
  to the ICT and of use of the Internet for a broad
  variety of activities (OECD).

12
Definition and measure of the digital divide

• Given on the developing countries
• - Statistical Series ITU data but also
  télégeography
• - Indicators and case studies,
• - E-readiness indicators at the same time the
  distribution of technologies and the capacity of
  the countries to form part of the development
  towards the information society.
• But no specific measure of the distance between
  the industrialised countries and the PEED

13
The Digital Divide at a glance (fixed)
14
The Digital Divide at a glance (mobile)
15
The Digital Divide at a glance (internet)
16
Proposal measure the distances

• The selected variables LP, PCs, Mobiles,
  Internet users (Documentary data base source ITU)
  
• Countries OECD, Country have high average
  Incomes, average weak bases and.
• Years 1989-2001
• Utilisation of the Analysis in Principal
  Components to seek main principles which preserve
  most information of a group of dots, without a
  priori on the relations between the variables.

17
Proposal measure the distances

• Results
• There is a plan (F1, F2) which explains 99 of
  the variance of the initial cloud and the main
  principles which represent a linear combination
  of the initial variables.
• The axis F1 gives a weight comparable to each
  method of access, it measures the abundance of
  the access, the F2 favours the LP (50) and
  Internet (25).

18
ACP States Results projections on the plan F1F2
19
Digital distances to the OECD
20
Dynamic of the digital divide

• The divide widens
• Behaviour of the groups of countries is
  homogeneous
• Distances decrease by 1989 to 1997, but then they
  increase quickly
• On the only fixed telephony, the ditch reabsorbs
  until 2001
• The role of technological innovation is decisive
• Progress in fixed and mobile telephony is not
  enough to bridge the divide
• New technological waves are the key factor of the
  cause divide dynamic
• But precisely, innovation is central in the
  information society

21
Dynamic of the digital divide

• This measure on under estimation probably reality
  
• If we could measure the intensity of use, it is
  probable that distances would grow more quickly

22
III. The factors of development of the access to
the electronic communication networks

• The principal explanatory factors are
• the incomes per capita the row analyses and the
  Jipp curves illustrate it, but correlation is not
  necessarily causality
• the time and technological progress the
  modelling of the development of the networks in
  the time
• the structure of the markets proposal for a
  general model using the technique of panel
• Exploration on other factors led to not very
  convincing results or to correlations between
  increasing monotonous variables

23
Taking into account the structure of the
markets a general model of development of the
infrastructures

• Model with fixed, variable effects centered
• hétérocedasticity correction
• CLLP ß1CLPNBT ß2CTEMP ß3PRIV ß4CREG
• LP Télédensity fixes for a date t
• PNBT Returned per capita for a date t
• TEMP Time of the panel.
• PRIV (0,1) Binary variable representing the
  privatisation and indicating the partial or total
  privatisation of the historical operator
• REG (0,1) Binary variable representing the
  Regulation and and indicating the creation of a
  regulation authority in practice this date
  coincides with the first step towards the
  effective liberalisation of the market and the
  introduction of competition

24
Results of the general model on the principal
lines
25
The general model applied to the various
variables

• The principal lines
• CLLP 0,16 CLPNBT 0,28 CTEMP 0,09 CPRIV
  0,08 CREG
• Mobile telephony
• CLMOB 0,52 CLPNBT 2,44 CTEMP 0,78 CPRIV
  0,52 CREG
• The distribution of the PCs
• CLPC 0,12 CLPNBT 0,92CTEMP 0,21CPRIV
  0,21CREG
• In the case of the Internet users the model does
  not give significant results
• Incomes have a real influence, but the time plays
  a decisive role
• for the mobiles and the PCs in all the cases
  both
• privatisation and competition variables add
  significant
• effects.

26
Conclusion on accesses and the factors of their
developments

• factors the time and technological progress, the
  incomes per capita and the structure of the
  markets.
• the income effect is the most visible one, but
  between groups of comparable level countries, it
  ceases to be discriminant.
• there are ranges of growth of the networks for
  which the models which describe the situation of
  the industrialised countries are also relevant.
  But there are effects of thresholds for the weak
  distributions and for saturations.
• the application of a general econometric model on
  the identified principal factors makes it
  possible to measure the relative effects of these
  factors.
• the structure of the markets has a significant
  effect, it raises the constraint of supply, but
  it is insufficient to bridge the digital divide
  (constraint of the demand) if the access models
  remain those of the industrialised countries.

27
Financing of the offer the twilight of state
monopolies

• Internal factors
• The inadequacy of the offer and
• The operators' inefficiency
• The financial difficulties of the public sector
• The emergence of new technologies and of new
  services
• External factors
• Pressure of the debt
• Example of liberalisation
• International negotiations under the WTO/AGCS

28
Financing of the offer

• DCs are in an external adaptation
• model
• In 2002, in 113 of the 201 of the ITU, the
  historical operator was partially or entirely
  privatised, in 49 others there was at least a
  private operator.
• The entirely private historical partially or
  operators account for 85 of the incomes, the
  other private actors represent 13 and the purely
  public operators only 2.

29
Financing of the Offer in the PEED the model of
the 1990-2000s

• International financing plays a considerable
• role
• Direct investment Flows (FDI) for acquisitions
  accounted for more than 40 billion USS during the
  decade
• Revenues from international communications for
  which 50 billion would have been transferred
  during the same decade
• There is a synergy between these two factors, the
• international incomes making acquisitions
  attractive.

30
Financing of the Offer the FDI-model threatened

• The most attractive privatisations are carried
  out
• The confidence of the markets with respect to the
  ICT decreased
• The incomes of the international communications
  of the developing countries are falling the
  settlement rates (ITU agreements) yield the step
  to the trade interconnection agreements, under
  the rules of the WTO, and within the American
  benchmarking.
• Migration towards the IP networks changes the
  distribution of the incomes of the international
  communications.
• Operators will have to turn to the national
  markets

31
Solvency of the demand

• If the countries are distributed in four
  categories high incomes, average tops, average
  bases and bases, in 2001 télédensities amounted
  to 3,85, 23,3 48 and 120 in 2001 with an
  overall average of 32,65
• But per capita, yearly communication expenditure
  was of 8 32 178 and 812, on average 157.
• In developing and emerging countries, the model
  of distribution of the North is not sustainable.
• However, there is a substantial demand for
  electronic communication services from the
  consumers everywhere

32
The national markets the solvency of the demand

• There is an important potential of development of
  the markets of the consumers with low income,
  provided the methods of supply adapt to the
  specific characters of demand.
• At the same time, several technological and
  organisational innovative ways open new
  perspectives for these consumers, for example
• - Mobile telephony with prepaid card
  telecentres, cybercafes,
• - Satellite technologies coupled with the VSAT
  the digital radio and digital television, the use
  of the powerlines (powerline communications), the
  digital radio broadcasting, the PCs at low cost
  (simputer) and even second-hand products.

33
IV. A new prospect low cost services

• The modernisation of the economy and of the
• administrations necessitates needs new
• information services
• New methods of use in the communications
  (mobiles)
• but also the cybercafes
• Of the new products like the simputer, the
  sofcomp aim not only products at low cost but at
  simplified interfaces (voices)
• the experience of the villages of Cambodia, of
  Costa Rica of Kigali with an Internet bus
• Electronic communication services develop through
• an offer adapted to the characteristics of
  customers
• with low income.

34
An example collective access

• There is a major range of collective access to
  electronic communication services, with an offer
  adapted to the characteristics of customers with
  low income or customers which are not familiar
  with these technologies.
• Collective access represents a considerable
  potential, in particular in the developing
  countries where it represents the least expensive
  access and where there is a synergy with mobile
  telephony.
• The empirical study demonstrates however that
  collective access develops relatively little and
  that it generally is not supported by the
  telecommunication operators.

35
A concept to be developed low cost services

• An important potential exists for new markets
  the
• consumers with low incomes - but their
• development represent
• a technological challenge (we saw the importance
  of the time variable)
• an industrial challenge what makes the price is
  not only complexity but the scale of production
  and DPI
• a distribution challenge which rests on proximity
  between salesman and user and on take up by the
  users (inspired by micro-credit experiment)
• a regulation challenge recognise the micro
  companies

36
General conclusions

• The analysis also shows that it is not only the
  delay in the introduction of a specific
  technology which makes the divide, it is also
  linked to the successive technological waves
  that reference to cognitive access, to
  appropriation and to the control of uses. It
  should be noted that this is compatible with
  alternative access modes.
• Results show that the development of the access
  is encouraged by various factors, in particular
  by the restructuring policies which make it
  possible to raise the constraint of the offer.
• But the effects of these policies are limited
  because they run up against the limits of the
  solvent demand.

37
General conclusions

• Additionally, the model of financing of the
  infrastructures, observed during the decade
  1990-2000 in the developing countries, is
  threatened.
• A new frontier the consumers with low incomes as
  illustrated by the booming of mobile telephony or
  collective accesses.
• The issue the mass diffusion of accesses and of
  uses.

38
Perspectives

• The ideas on the development of an informal
  economy at the border of most advanced
  technologies and its swing in the formal economy.
  
• The role of research, because in this area we
  witness ruptures caused by technological
  breakthroughs
• The poverty reduction strategies the ICT had
  important individual effects (brain drain to the
  United States for example, development of the
  software industry in India) but, without
  exception, did not spread around a clear pattern.
  

39
Perspectives

• Convergence, and key role of Internet (services,
  VoIP, audiovisual)
• Need for a Mass diffusion of Internet access
• New ways for Internet Governance, from
  hierarchical to polyarchical structures .

40
To continue this dialogue This work is
published at Economica under the title "The
North-South Digital Divide" Additional
information on www.soupizet.net Thank you
for your attention jean-francois.soupizet_at_ec.euro
pa.eu