Beyond the Internet:
Radical Reformer vs. Smooth Transformer
Meelis Kitsing
International Policy Fellow
Center for Policy Studies
(affiliated with the Open Society Institute
and Central European University)
kitsing@policy.hu
Outline
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Why research the Internet diffusion of Estonia and Slovenia?
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Methodology
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Outcomes in Internet diffusion
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Explaining outcomes
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Estonia: Radical Reformer
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Slovenia: Smooth Transformer
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Reformation vs. Transformation
PISTA'03 Orlando, Florida
Why research the Internet diffusion
of Estonia and Slovenia?
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Public policy: enlargement of the European Union, the
eEurope+ and eEurope programs, agendas of governments,
international organizations and NGOs.
Political economy of transition
The performance of different political and economic systems
(free markets vs. social democratic corporatism)
Role of institutions in economic performance
Market failures and public sector failures
Trade, FDI and technology transfer
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Studies on Internet diffusion
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PISTA'03 Orlando, Florida
Methodology
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A qualitative approach
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Two primary case-studies: Estonia and Slovenia
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Two secondary case studies: Latvia and Slovakia
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Dependent variable is Internet penetration
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Explanatory variables are political, legal and economic factors
PISTA'03 Orlando, Florida
Outcomes in the Internet diffusion
Country Internet Users in 1999
2000
(per 10,000 inhabitants)
Czech Republic
Estonia
Greece
Hungary
Italy
Latvia
Lithuania
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
682
1387
705
597
1430
430
279
542
1000
267
1112
1257
703
971
2721
947
715
2304
619
609
725
2494
357
1203
1507
1343
2001
2002
1363
3005
1321
1484
2758
723
679
978
3494
447
1203
3008
1828
1467
4133
1815
1576
3010
1331
679
984
3555
806
1604
4008
1931
Source: International Telecommunications Union (2003).
PISTA'03 Orlando, Florida
Explaining outcomes
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Geography
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Size of country
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Per capita GDP
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Civil liberties and democracy
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Infrastructure
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Number of personal computers
PISTA'03 Orlando, Florida
Estonia: Radical Reformer
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Initial starting position: COCOM and limited diffusion of ICTs
Privatization of incumbent telecom company in 1992
Monopoly in fixed lines over voice telephony until end of 2000
Free market in data transmissions, ISPs and backbone providers
Partial liberalization in leased lines and alternative uses of
infrastructure
Free market reforms: liberal FDI and unilateral free trade, flat
income tax, zero corporate income tax
Government use of Internet – “epistemic IT community”
Presence of diverse interests in the telecom sector
Predominantly center-right political parties
PISTA'03 Orlando, Florida
Slovenia: Smooth Transformer
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Initial conditions: limited technology transfer and trade
relations with Western Europe
State/domestic ownership of incumbent telecom
company
End of monopoly in fixed lines over voice telephony
delayed constantly
Licenses required for ISPs; leased lines partially
liberalized; data transmissions monopoly a reality
Trade gradually liberalized; selective protectionism in the
FDI regime (discriminatory privatization process)
Social democratic corporatism: centralized labor unions
and predominantly center-left political parties
Government use of Internet
PISTA'03 Orlando, Florida
Reformation vs. Transformation
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Gradualism and shock therapy in transition
Social democratic corporatism and free market system
Wealth effect
Path-dependence
Vested interests and regulatory capture
Accountability of incumbent telecom company
Regulatory framework: formal and informal factors
Internet access prices
PISTA'03 Orlando, Florida
Conclusion
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Similar outcomes with different paths of transition and political
economy systems
Slovenia represents exception: initial position and wealth
Estonian experience more relevant for policy implications
Little hope for specific Internet policy without broader changes
Independence of regulator
Reducing barriers for competition
Liberalizing FDI regime
Credible commitments to market opening
PISTA'03 Orlando, Florida
Thank you
Presentation and conference paper are available.
Research paper and policy paper will be made
available by September at
www.policy.hu/kitsing
PISTA'03 Orlando, Florida