Information and Communication Technologies and Government

1
Information and Communication Technologies and
Government

• Veneta Andonova
• Instituto Tecnologico Autonomo de Mexico (ITAM)
• ESNIE 2006 Workshop

2
Introduction

• Information and Communication Technologies (ICT),
  institutions and economic development
• Andonova, V. (2006) Mobile phones, the Internet
  and the institutional environment,
  Telecommunications Policy 30, 29-45
• Andonova, V. and L. Diaz (2006) Can progress be
  resistant to bad institutions? The case of ICT,
  working paper
• VoIP, technology interactions and network effects
• Ladron de Guevarra, A. and V. Andonova (2006)
  Interacciones tecnologicas y efectos red Claves
  para predecir el impacto del VOIP sobre la
  industria de las telecommunicaciones, Universia
  Business Review
• Ladron de Guevarra, A. and V. Andonova (2006)
  Technology interactions in the presence of
  network effects, UPF working paper

3
Topics of Discussion

• Different ICT place different requirements on the
  receptive institutional environment.
• Changed technological parameters of ICT reduce
  requirement for government effectiveness.

4
Why study ICT

• ICT are a major determinant of economic growth as
  they reduce information asymmetry.
• ICT become fast the foundation of the knowledge
  economy.
• New technologies such as mobile phones and
  Internet are important demand drivers for the
  telecommunications sector.

5
Digital Divide

• Digital divide is the difference between those
  with permanent, effective access to new ICT and
  those with none.
• If ICT are so important why arent they every
  governments priority?
• productivity paradox
• limited resources
• institutional environment (Henisz Zelner, 2001,
  Levy Spiller, 1996)

6
Path-dependent modelof development
7
Can progress be resistant to bad institutions?

• H1 An investment friendly institutional
  environment, characterized by lower investor
  risks, correlates positively with the diffusion
  of ICT.
• H2 An investment friendly institutional
  environment, characterized by lower investor
  risks, correlates more strongly with the
  diffusion of those ICT which rely most heavily on
  site-specific assets and require larger up-front
  investments.
• H3 An investment friendly institutional
  environment, characterized by lower investor
  risks, correlates less strongly with the
  diffusion of those ICT which rely more heavily on
  easily transportable, re-deployable modules.

8
Empirical Test

• POLCON a structurally derived and
  internationally comparable measure of the degree
  of constraints on policy change (Henisz, 2000).
• Political Rights and Civil Liberties (Freedom
  House)
• Control variables price variables (connection
  charge and price per minute) GDP per capita,
  illiteracy, urban population, English as a second
  language, degree of competition and privatization
  in the sector, electric grid and other
  infrastructure indicators)

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Empirical Results
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Policy Implications

• Differences observed in the use of ICT,
  frequently called the digital divide, stem from
  deeper differences in what might be called
  institutional divide.
• Human capital and the degree of urbanization are
  important determinants of ICT diffusion.
• Consider changing institutions indirectly by
  using technologies which are less sensitive to
  institutional underdevelopment and which, in
  tern, through market dynamics, will endogenously
  change institutions.

11
Technology Interactions and Network Effects

• Three technologies fixed telephony, mobile
  telephony and Internet
• These ICT have huge positive effects on TFP, but
  telecoms appropriated only a small part of the
  value they created.
• The next big thing is VOIP.
• Can we predict what is going to happen in this
  industry and what the role of the government will
  be?

12
Real Life

• In September 2005 eBay purchased Skype for 4.1
  billion USD.
• How would VOIP affect other ICT?
• What are the interdependencies among ICT
  technologies?
• Would VOIP (innovation) change the role of
  government in the sector?

13
Our Model
14
Empirical Results
           Level of fit
Complementarity-Substitutability effects between
information technologies (?xy)  
195 countries and 1991-2003, 1438 country-year
observations
NS Not statistically
significant at 5             S
Significant at 1 , positive coefficient          
   -S Significant at 1 , negative
coefficient
15
Results

• Mobile telephony and Internet are fully
  complementary.
• Fixed telephony fosters the diffusion of mobile
  telephony, which on its turn cannibalises the
  diffusion of fixed phones.
• Fixed telephony facilitates the diffusion of
  Internet but Internet diffusion does not have any
  significant effect on fixed telephony diffusion.

16
Implications

• Total complementarity between mobile telephony
  and Internet implies that hybrid technologies
  would prevail over classic versions of Internet
  and mobile.
• eBay has moved in this direction.
• One-technology companies should look for
  strategic alliencies.
• Prices paid for 3G licencies might not be that
  exaggerated?!

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Implications

• In places where firxed telephony has already been
  deployed, mobile telephony works as a complement.
• In places with long waiting lines, mobile is a
  substitute for fixed telephony.
• Given that deployment of fixed telephony depends
  a lot on institutions, we claim that fixed and
  mobile telephony behave as complements or
  substitutes depending on the level of
  institutional development.

18
Implications

• Fixed telephony is the base for Internet
  diffusion, where more VOIP means less fixed
  lines.
• Countries with high Internet usage indices show a
  decline in fixed lines.
• Traditional telecoms should convert into Internet
  providers.
• The market of Internet connectivity is more
  competitive than fixed telephony (natural
  monopoly).
• VOIP reduces the need of high government
  effectiveness in the regulation of fixed
  telephony.

19
Discussion