Economic Meaning of Emerging
Communication Technologies for
CEE Countries and Baltic States
Jaroslaw K. Ponder
Market, Economics and Fianance Unit
Telecommunciation Development Biureau
International Telecommunication Union
Seminar on Mearket Analysis in CEE Countries and Baltic States:
Economic Dynamics of Newly Liberalized Telecommunication Markets in
CEE Countries and Baltic States
5 - 7 October 2004
Vilnius, Lithuania
Agenda
• ICTs in CEE Countries
– Fixed Telecommunciations
– Mobile Telecommunications
– Internet
• Economic Meaning of ICTs in CEE
Countires
• Policy Implications
21. September 2004
2
Fixed Telecommunications in
CEE Countries
• Fixed lines per inhabitant including ISDN channels per
100 inhabitants and per 100 households in 2002-2003
decrease in many countries .
– Are these markets already saturated?
– Is it effect of emerging communication technologies, especially
wireless communication technologies?
– Is it bad performance of the telecommunication sector?
• The following countries belong to the exceptions:
–
–
–
–
Bulgaria
Czech Republic
Poland
Slovenia
Source: IBM (2003)
21. September 2004
3
Modernization of the Networks
Digitalization (1991-2003)
100%
•
Estonia
90%
80%
70%
Hungary
Source: ITU
60%
Slovenia
50%
Czech Rep.
•
40%
Poland
30%
20%
•
10%
0%
1990
1991
1992
1993
1994
Czech Republic
1995
1996
Estonia
1997
1998
1999
Hungary
2000
2001
Poland
2002
2003
Slovenia
Investment (1991-2003)
The rate of digitalization of fixed networks
in CEE countries is still increasing as the
effect of the intensive investment
programmes.
In 2003 most of the countries achieved the
level of the 100 %.
The digitalization of the networks is the
prerequisite for the modern communication
services.
Digitalization (2002)
1700%
1600%
1500%
1400%
1300%
1200%
Source: ITU
1100%
1000%
900%
800%
700%
600%
500%
400%
300%
200%
100%
0%
1991
1992
1993
1994
1995
Czech Republic
21. September 2004
1996
Estonia
1997
Hungary
1998
Poland
1999
2000
Slovenia
2001
2002
Source: IBM (2003),
4
Mobile Telecommunications in CEECs
•
•
•
•
•
The popularity of the mobile telecommunications is still increasing. Mobile penetration
remained below the EU average in most CEECs, except the Czech Republic and
Slovenia; As of 30 June 2004, in Poland the penetration rate is on the level of 50%.
The prevailing technologies include: GSM in 3 frequency bands, NMT 450, CDMA 450
MHz (e.g. Romania, Russia, Latvia), WiFi and WiMAX.
The value added services sometimes are implemented on CEE markets even faster
than in western European countries: MMS, GPRS, HCDS.
Most of the countries has already made
decision concerning the implementation of
UMTS. Some of countires are just in the
process of granting of licenses. Some of the
countries review the licensing policies (e.g.
Poland, question of the license fees).
In many countries the market segment of
costumers with the high willingness to pay
for the communication services has been
exhausted. The operators look for the new
business strategies. The Polish experiences
demonstrate that the youth oriented strategy
can be successful. By achieving the
economies of scale it is possible to enhance
the profitability.
Source: IBM (2003)
21. September 2004
5
Telecommunication Market
Segmentation in CEECs, 2002
Fixed Tel.
Mobile
Fixed Internet
45%
50,00%
49%
41,20%
SI
41%
51%
SK
54%
PL
51%
39%
44%
MT
36%
LT
60%
LV
42%
HU
41%
EE
50%
CZ
54%
49%
40%
54%
39%
48%
57%
53%
41%
CY
39%
10%
0%
35%
50%
40%
30%
20%
46%
80%
70%
60%
40%
100%
90%
1999 2000 2001 2002
Data+LL
Note: * - Cyprus, Malta has been excluded, LL – leasing of lines.
Source: PWC (2002), IBM (2003), own calculations.
21. September 2004
6
Data Transmission Services in Mobile
Telecommunications in CEECs, 2001-2006
Source: Ludwiczynski A. (2002)
Source: Ludwiczynski A. (2002)
21. September 2004
7
Internet Dynamics
Eastern Europe Penetration Growth
(DSL/100 phone lines, 1999-2003)
Internet Users in CEECs (2003)
0,80
0,71
0,70
0,60
0,50
0,35
0,40
0,30
0,20
0,09
0,10
0,00
0,02
0,00
1999
2000
2001
Source: eEurope+ NSO and Household Survey, June 2003
Eastern Europe
Growth in the number of Internet users
2002
2003
Source: www.point-topic.com (2004)
Growth of DSL Subscribers in
Eastern Europe (000s), 1999-2003
455.50
500
450
400
350
300
250
200
124.10
150
100
33.10
7.80
0.00
50
0
1999
Source: eEurope+ NSO and Household Survey, June 2003
21. September 2004
2000
2001
2002
2003
Source: www.point-topic.com (2004)
8
Internet Dynamics
Average spending of internet access
per month as percentage of
monthly household
•Source: eEurope+ NSO and Household Survey, June 2003
Affordability of a PC relative to monthly
household income
•eEurope+ NSO and Household Survey, June 2003; CY,MT and TR - National Surveys
21. September 2004
9
Internet Dynamics
Percentage of enterprises having
access/broadband access to the Internet
Percentage of households with
broadband access to the Internet
•Source: eEurope+ NSO and Household Survey, June 2003
•Source: eEurope+ NSO and Household Survey, June 2003
21. September 2004
10
Digital Divide:
European Perspective (2002)
GDP per
capita, PPP
($)
Fixed
Telephone
Mobile
Telephone
Internet User
Internet Hosts
PCs
Cyprus
13.300
69,3%
59%
30%
0,64%
24,4%
Czech R.
15.300
34,8%
84%
30%
2,48%
14,6%
Estonia
10.900
35,0%
63%
41%
4,68%
21,0%
Hungary
13.300
35,4%
68%
16%
2,57%
10,8%
Latria
8.300
30,6%
40%
14%
1,53%
17,1%
Lithuania
8.400
26,8%
47%
20%
1,77%
7,0%
Malta
17.000
52,7%
72%
29%
1,93%
22,9%
Poland
9.500
34,7%
35%
23%
1,89%
8,5%
Slovak R.
12.200
27,2%
54%
16%
1,65%
18,4%
Slovenia
18.000
42,4%
85%
42%
1,92%
30,0%
EU AC average
12620
38,9%
60,7%
26,1%
2,10%
17,5%
Greece
19.000
52,9%
83,8%
18%
1,45%
8,1%
Portugal
18.000
41,9%
81,9%
35%
1,58%
11,7%
Spain
20.700
45,9%
82,2%
19%
1,45%
56,1%
EU-3 average
19233
46,9%
82,6%
24,1%
1,49%
25,3%
EU-15 average
26.466
56,7%
81,8%
37,1%
6,5%
37,2%
EU AC countries
EU 15 countries : poor
Sources : ITU (2003), IBM (2003), EUROSTAT (2003) own calculations.
21. September 2004
11
“Digital Divide” :
European Perspective (2002)
100,0%
100,0%
90,0%
82,6%
81,8%
80,0%
72,7%
70,0%
60,7%
60,0%
50,0%
56,7%
47,7%
46,9%
38,9%
40,0%
37,1%
30,0%
37,2%
26,1%
24,1%
25,3%
17,5%
20,0%
10,0%
6,5%
2,1%1,5%
0,0%
GDP per capita, PPP
(EU=€26.466)
Fixed Telephone
Sources : ITU (2003), IBM (2003),
EUROSTAT (2003) own calculations.
21. September 2004
Mobile Telephone
EU AC average
Internet User
EU-3 average
Internet Hosts
PCs
EU-15 average
12
IKT Expenditures in CEECs (2002)
• Poland, Czech Rep. and Hungary
belong to the biggest ICT markets in
CEEC region. ICT expenditures of these
countries represent about 70% of all
expenditures of CEEC region.
• Per capita expenditures in CEECs are
about 4 times smaller than the
average expenditures of west European
countries.
Expenditures for ICT in CEECs
CEECs,, 2002
(total 40023 Mill. €)
Expend.
For ICT
(Mill.€)
Romania
Bulgaria
Lituania
Poland
Letonia
Slovakia Rep.
Estonia
Hungary
Czech Rep.
Slovenia
CEEC total
Western Europe total
3916
1700
1086
15049
951
2296
804
6111
6422
1688
40023
592000
Share in
Relation
ICT
CEEC
ICT/GNP (%) Expenditur
Market (%)
Per capita
(€)
9,8
8,6%
180,5
4,2
11,4%
213,1
2,7
7,5%
311,7
37,6
7,7%
389,5
2,4
10,6%
405,4
5,7
10,7%
426,8
2
12,6%
590,6
15,3
10,2%
599,3
16
9,9%
623,9
4,2
7,9%
846,2
100
9,0%
387,2
100
6,7%
1521,5
S lovenia
4%
Letonia
E sto n ia
Bulgaria
Lituania
2%
2%
4%
3%
P o la n d
Slovakia Rep.
38%
6%
Romania
10%
Cze c h R e p .
16%
H u n g a ry
15%
• However nominal ICT-expenditures of CEEC
are significantly smaller, the CEEC countries
spend for ICT significantly more in relation
to their GNP (in average 9 %). In western
Europe the countries spent 6,7 % of their GNP
on ICT.
• Estonia, Bulgaria, Latonia, Slovakia and
Hungary, of which ICT/GNP relation exceeds
10 % turn a special attention.
Source: EITO (2003)
21. September 2004
13
Economic Meaning of
Telecommunication Sector
Size of telecommunications market
compared with GDP, 2002
Source: IBM, 4th Report on Monitoring of EU Candidate Countries (Telecommunication Services Sector), Dec 2003
21. September 2004
14
Economic Catch-up Process:
Simulation
EU AC countries GDP per capita,
PPP ($)
Slovenia
Malta
Czech Rep.
Cyprus
Hungary
Slovakia
Estonia
Poland
Latria
Lithuania
EU AC average
Spain
Greece
Portugal
EU-3 average
EU-15 average
Years needed to Catch-up to the EU average
Hypothetic Average Economic Growth Rates
2002
1%
2%
3%
4%
5%
18.000
17.000
15.300
13.300
13.300
12.200
10.900
9.500
8.300
8.400
12.620
20.700
19.000
18.000
19233
26466
39
44
55
69
69
78
89
103
117
115
74
25
33
39
32
19
22
28
35
35
39
45
52
59
58
37
12
17
19
16
13
15
19
23
23
26
30
35
39
39
25
8
11
13
11
10
11
14
18
18
20
23
26
30
29
19
6
8
10
8
8
9
11
14
14
16
18
21
24
24
15
5
7
8
7
Source: Own calculations based on data from WDI (2002).
21. September 2004
15
Economic Meaning of ICTs in CEECs
Diffusion Determinants
Institutional Approach
21. September 2004
Economic
Wealth
Telecom
Infrastructure
and/or Usage
Economic Effects of ICT
16
Economic Meaning of ICTs in CEECs
• Diffusion of ICTs in CEECs
– Muller, Salsas (2003) – Determinants of the Internet
Usage : internet hosts,
hosts income per capita,
capita openness,
openness
education,
education political and civil freedoms,
freedoms state of
transition towards a liberalized telecommunications
regime, the state of the telecommunications
infrastructure,
infrastructure cost of telephone
• Internet usage costs do not explain cross-country differences in
the number of Internet hosts and users
– Muller, Salsas (2004) – Significant determinants of the
Internet usage in enterprises: trade,
trade company size,
size
computer usage,
usage degree of the telecom market
liberalization
21. September 2004
17
Economic Meaning of ICTs in CEECs
• Institutional Approach
– Piatkowski (2003) – New Economy Indicator – level of
institutional readiness of transition economies for
adoption of the New Economy. Slovenia, Czech
Republic, Hungary and Estonia belong to the regional
leaders. (NEI Factors: regulation, infrastructure, trade,
financial system, R&D, human capital, labour market
flexibility, product market flexibility, entrepreneurship,
macroeconomic stability)
– Piech (2004) – Knowledge Assessment
Methodology of World Bank (KAM Methodology:
GDP, HDI, Tariffs, Property rights, Regulation,
Researchers in R&D, Manuf. Trade, Adult literacy, …,
Telephones, Computers, Internet hosts). Czech
Republic and Estonia,
Estonia the most promising countries of
region. The same structure as developed countries.
21. September 2004
18
Economic Meaning of ICTs in CEECs
• Economic Growth
– Kolasa, Zolkiewski (2004) – Poland: ICT investment contributes
positively to TFP growth
– Piatkowski (2003) – CEEC-8: ICT capital contribution to output
growth and labour productivity (extraordinary increase in real ICT
investment caused by a) falling prices of ICT, b) higher-thannormal returns on investment due)
– Rajasalu, Laur (2003) – Estonia: low contribution of ICT sectors in
Estonia´s output. The evidence of direct positive impact of high
tech, medium, high tech and knowledge intensive industries on
economic growth is not very convincing. High dependence on
subcontracting and transfer pricing makes the contribution of high
and medium-high tech industries rather low. Economic growth is
influenced more by indirect impact of ICT that made the economy
as a whole more competitive and helped to attract investments
and create new jobs.
21. September 2004
19
Economic Meaning of ICTs in CEECs
• Economic Growth
– Van Ark (2004) – Old and New Europe: Contribution of ICT
investment to productivity growth is positive and significant but
differentiates between all CEECs exist.
• Champions: Czech Republic, Hungary
– Perminova (2004) – Russia: ICT contribution to the labor
productivity growth 1996-2000 in:
• ICT using sector - even 5 times bigger than in Europe and 2 times as
big as in USA,
• non ICT using sector - like in USA,
• ICT producing sector - very small 1/10 of European or USA
achievements.
21. September 2004
20
Correlation between ICT and
GDP per capita (ppp)
80%
70%
60%
50%
40%
30%
20%
10%
0%
Greece
Portugal
Bulgaria
Estonia Hungary
Spain
Ireland
Cz. R. Slovenia
Slovak R.
y = 1E-05x + 0,1999
Poland
Romania
2
R = 0,5989
0
5.000
10.000 15.000 20.000 25.000 30.000 35.000
Mobile Telephone Density
Fixed Telephone Density
Fixed Telecommunications Mobile Telecommunications
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
y = 3E-05x + 0,006
2
R = 0,7428
Estonia
5.000
Portugal
Slovenia
Spain
Greece
Czech R.
Poland Hungary
Internet Hosts Density
Internet User Density
Denmark
20%
0%
5.000
10.000
15.000
20.000
25.000
GDP per Capita (PPP, $)
25.000
30.000
35.000
30.000
35.000
Finland
Netherlands
y = 0,0023e0,0001x
R2 = 0,6295
10%
8%
Sweden
6%
4%
2%
Latvia
0
5.000
Ireland
Estonia
Czech R.
Poland
Hungary Slovenia
0%
0
20.000
12%
Sweden
Ireland
10%
15.000
Internet Hosts Penetration
50%
Estonia
10.000
GDP per Capita (PPP, $)
Internet User per 100
30%
Denmark
Czech R.
Lithuania
0
40%
Ireland
Hungary
Slovak R.
Poland
GDP pec Capita (PPP, $)
y = 1E-05x - 0,0085
R2 = 0,5405
Portugal
Spain
Slovenia
Greece
10.000
15.000
20.000
25.000
30.000
35.000
GDP per Capita (PPP,$)
Note: The depicted relationship is calculated from data for the year 2000 from 26 European countries, i.e. EU-14 (EU -15
minus Luxemburg), EU accession countries, Turkey and Bulgaria. / Source: ITU (2003), own calculations.
21. September 2004
21
Correlation Coefficients, (2002)
GDP per
capita,
PPP ($)
Pearson
Correlation
GDP per
capita,
PPP ($)
1
Fixed
Telephone
Mobile
Telephone
Internet
User
Internet
Hosts
PCs
,759**
,752**
,542**
,358
,723**
,005
,079
,000
25
,628**
25
,380
25
,726**
,001
,061
,000
25
,506**
25
,237
25
,518**
,010
,254
,008
25
1
25
,688**
25
,631**
,000
,001
25
1
25
,527**
Significance
,000
,000
(2-side)
N
25
25
25
Fixed
Pearson
,759**
1
,564**
Telephone Correlation
Significance
,000
,003
(2-side)
N
25
25
25
Mobile
Pearson
,752**
,564**
1
Telephone Correlation
Significance
,000
,003
(2-side)
N
25
25
25
Pearson
,542**
,628**
,506**
Internet
User
Correlation
Significance
,005
,001
,010
(2-side)
N
25
25
25
Internet
Pearson
,358
,380
,237
Hosts
Correlation
Significance
,079
,061
,254
(2-side)
N
25
25
25
PCs
Pearson
,723**
,726**
,518**
Correlation
Significance
,000
,000
,008
(2-side)
N
25
25
25
Note : ** The correlation is significant on the level of 0,01 (2-side).
Source : ITU (2003), own calculations.
21. September 2004
25
,688**
,000
,007
25
,631**
25
,527**
,001
,007
25
25
25
1
25
22
Policy Implications
• Digital modernization should be a key word for the CEECs looking for
the factors accelerating the process socio-economic catching-up.
• The first proves of the economic meaning of ICT sector in CEECs opens
the new perspectives in terms of the economic policies (also for the
developing countries).
• The existence of the digital divide should motivate the CEECs to look for
the most efficient digital ICTs (Fixed telecommunications is important
but the emergence of all wireless technologies can minimize its role)
• The ICT diffusion depends on the prices that is why especially in
countries of a low average disposable income the fostering of
competition in ICT markets should become the most important objective
of each policy maker.
• The state should use the potential of digital ICTs for its modernization
what can be connected with plenty of economic advantages. In the
process of creating of workable e-government the sequencing should
play the most important role.
21. September 2004
23
Thank you very much for
your attention
Jaroslaw K. Ponder
Market, Economics and Finance Unit
Telecommunication Development Biureau
International Telecommunication Union
Tel.: +41 22 730 59 10
E-mail: Jaroslaw.Ponder@itu.int
21. September 2004
24