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Balancing market forces with pro-development goals will pave the way for a socially aware and effective ICT industry, argues Gillian M. Marcelle.

Since the 1984 Maitland Report first advocated greater investment in basic telecommunications, services have grown exponentially. The scope of applications has had an equally impressive expansion.

However, the telecommunications and ICT (information and communication technology) sectors are still a long way from promoting development goals, including poverty reduction. The biggest challenge in this respect is market failure.

Private companies target consumers who can afford to pay, so they fail to invest in ICTs for rural communities, the urban poor and other marginalised groups. This focus on the top-end of the market maximises private benefits at the expense of social benefits, and poses a serious public policy challenge in developing countries.

All citizens have the right to communication and information. The information society must be reshaped if it is to deliver greater developmental impact. If we continue to use the wrong tools, relying on market forces to deliver technology, we will limit the benefits of ICT to consumers who can afford to buy them: an unfair system.

Like any other technology, ICTs are shaped by social and political forces. It does not automatically provide significant benefits for, or have a major impact on, the central developmental goals of poor countries, nor their social and economic priorities. Addressing this requires leadership from developing countries and their partners.

Over the past 20 years, there have been many shifts in vision and policy in the ICT sector. From 1984 to 1989, for instance, the emphasis was on expanding basic telecom services. And between 1997 and 2003, attention focused on the growing 'digital divide' between richer countries and the developing world.

From 2003 until now, policy has focused on how to use ICTs to achieve broader development objectives, and how to assess the impact of ICTs on the UN Millennium Development Goals. Yet despite the involvement of several important stakeholders, including the UN and some of its agencies, academics and civil society advocates, the results have been discouraging.

At the end of the second phase of the World Summit on the Information Society (WSIS) in Tunis last year, it was clear that development issues, particularly questions of finance, had not received enough attention.

Barriers to change

Why did this happen? One factor is over-reliance on a dominant tradition within economics.

The most influential approach to managing telecommunication markets is based on neoclassical economics theory. In this framework, once the number of suppliers operating in a market increases, prices fall, the range of applications rises and the quality of service delivered to customers improves. But real markets do not behave as the textbooks predict.

The telecommunication industry is capital intensive; operators must invest heavily in infrastructure before delivering services. But once their networks are installed and the subscriber base expands, marginal costs plummet. Large, established companies benefit from people's resistance to change.

Children in the Philippines learning English
at a community centre (Photo Credit: IDRC)

The situation is complicated by the ownership profile of the ICT industry in most developing countries. Until a decade ago, large telecommunication companies in poor countries were mostly state-owned and managed as public utilities. This had the politically useful function of conveniently absorbing surplus skilled and unskilled workers.

Even now, board positions on these companies are awarded to loyal party members. This sits uncomfortably with renewed efforts to privatise state telecommunication companies, liberalise markets and introduce institutions to regulate the process.

Creating an information society is essentially a political process; instead of relying on economic forces, governments and other stakeholders must invest in a range of capital assets to expand the ICT sector and ensure the diffusion of ICTs to users at the bottom of the market.

This is well understood in countries that consult all stakeholders before forming their ICT policy, but not by those following narrowly focused technical exercises led by multilateral agencies.

The political dimension

Politics is never absent at any stage in the creation of an information society.

In the early stages of expanding networks and infrastructure, national interest groups compete for licences, and global interest groups aggressively pursue market entry. Once they are active in the market, countries need to balance public policy interests and private returns.

It is likely that over time, different interest groups will hold varying views about whether maximising consumer welfare or supplier benefits is most important. But the state should set priorities. In developing countries, laws and policies need to uphold a balance.

This is particularly difficult when large corporations use political influence and active lobbying to dominate small economies. The balance is often tilted in favour of companies rather than general social welfare. Effective independent regulatory agencies play a key role in establishing an information society.

However, only a handful of developing countries have such agencies. Most find them difficult to establish and maintain.

Effective regulatory bodies are defined by law, their boards are appointed by the head of state, and they have a permanent source of funding. In the majority of countries, however, these agencies are not financially independent and autonomous and their boards and senior management teams are not shielded from day-to-day political interference.

The ICT sector has also seen wasteful stock market speculation, poor governance, corporate crime, and greed.

For example, in the recent 'spectrum auctions', slices of the electromagnetic spectrum were sold for wireless communication devices at extremely high premiums. Overinvestment in broadband networks also led to the collapse of telecom company's share prices as they absorbed considerable costs.

These trends have meant that there was persistent underinvestment in the very applications that could help to achieve development goals by serving marginalised communities.

Neoclassical economic theory does not take account of the variety of structural and political economy factors affecting the ICT market. As a result, sector reform — which has focused on increasing the number of companies — has not maximised the benefits of ICT investment.

A telephone booth on the shore of Retba lake, Senegal  (Photo Credit: IRD)

Mainstream approaches have also underestimated variation. In some developing countries, telecommunication markets display features of 'natural monopoly', in which one provider dominates the market despite years of liberalisation or deregulation.

This is often the case when smaller competitors cannot invest in infrastructure or technology to effectively challenge the more powerful player. Sometimes, despite deregulation, market leaders are artificially protected from competition by complicated interconnection rules set by weak regulators, making it impossible for new suppliers to emerge.

But the problems are not limited to domestic issues. International trade arrangements in the telecom markets have also stopped ICT aligning with development.

The World Trade Organization's General Agreement on Services (GATS) negotiations, which concluded in 1997, dramatically altered the landscape in which individual countries make policy decisions.

Developing countries were not the architects of the agenda: it emphasises harmonising the domestic regulatory systems between countries and opening up markets but is silent on how ICTs might compliment poverty reduction and capacity building.

A reliance on changes in market structure and free trade is not enough to bring about social development.

Developing countries need to build institutional capability to analyse the industry, track its development, facilitate technological learning and innovation, and change the market structure. Social benefits needs to form part of the policy equation.

A different approach

When developing countries do not see the benefits of ICTs — such as job creation, empowerment, self-expression, and improvements in wellbeing — it is largely down to having a market-driven approach.

Such approaches restrict how ICTs are applied, for instance in education and health, because the neediest communities cannot pay market rates for these services. The values and principles of the ICT sector have led to a narrow focus on applications for the upper and middle classes.

ICTs have not often been used to stimulate participatory governance, and governments have been inflexible with civil society organisations about the use of email and SMS messaging for human rights campaigns.

How then can the ICT industry promote development? A starting point is policy frameworks that build on public sector leadership to:

  1. Promote widespread use of ICT applications
  2. Design relevant applications
  3. Globalise production of ICT equipment and services
  4. Provide cost-effective ICT-enabled social services (health, education, political participation, community management)
  5. Ensure greater participation in decision making
  6. Make public investment in the public interest
  7. Balance diverse interests

It is vital to note there has been limited progress toward establishing a causal relationship between the expansion of the ICT sector and broad development objectives. We need more evidence-based analysis to avoid reacting to hype. And more work is needed before the right questions can be asked, and the appropriate tools developed.

In implementing this framework, there are specific roles for national governments, the private sector, financial institutions and civil society. The follow-up programme for the WSIS provides a significant opportunity for the international community to help resolve this challenging problem of how ICTs can promote development, putting technology to the service of humanity.

Gillian Marcelle is principal consultant at Technology for Development (TfDev), South Africa, and visiting fellow at SPRU (Science and Technology Policy Research), University of Sussex, United Kingdom

References

Mansell, R. E., and Wehn, U. (eds). 1998. Knowledge Societies: Information Technology for Sustainable Development. Oxford: Oxford University Press
http://www.sussex.ac.uk/Units/spru/ink/knowledge.html

Millward-Oliver, G. (ed), 2005. Maitland+20, collection of essays to mark the 20th anniversary of the celebrated Maitland Report (The Missing Link), Wiltshire: Anima

Tongia, R. Subrahmanian, E. and Arunachalam, V.S. 2005 Information and Communications Technlogy for Sustainable Development: Defining a Global Research Agenda. Bangalore: Allied Publishers
http://www.cs.cmu.edu/~rtongia/ict4sd_book.htm

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