IT infrastructure and economic development

Access to and the speed and reliability of broadband infrastructure is one of the key institutional factors that impact on economic development. The lack of an affordable and cost-effective broadband network can be a huge barrier to economic growth especially in an age where companies in many rich countries are looking to outsource their back office and call centre services to countries where operating costs are lowest. The 2009 UNCTAD Information Economy Report provides a wealth of background information on the global digital divide. According to the latest report, businesses and consumers are 200 times more likely to have access to broadband in developed countries than in the poorest Least Developed Countries (LDCs). And the monthly cost of broadband access varies to an incredible degree - from over $1,300 a month in Burkina Faso, the Central African Republic to less than $13 in Egypt.

UNCTAD reports that mobile telephony is overtaking computers as the information and communications technology (ICT) tool of choice in developing countries. Farmers can check commodity prices, workers in urgan areas can tranfer money to their families without the need to travel miles to a bank. In Africa there are already 20 times more mobile subscribers than fixed lines and there are real hopes that the African economy will continue to reap the dividend of much better access to mobile telecommunications. Rory Cellan Jones, the BBC’s technology correspondent recently spent a week reporting from different African countries and his excellent reports can be found here.

Developing countries account for two thirds of all mobile phone subscriptions. Cheaper prices for handsets and access to networks has increased affordability to encouraged the development of a much larger installed customer base from which economies of scale can be achieved. Some developing countries have lowered import tariffs on handsets in a bid to lower domestic prices and cause a further expansion of demand.

The UNCTAD report has some useful country case studies on the role that investment in and usage of telecommunications can have on growth and economic development. Here are two - one on Uganda and one on broadband in the Bahamas.

UGANDA

Uganda has a population of around 32 million, of which more than 85 per cent live in rural areas. The mobile market has progressively grown more competitive. Service began in 1995 when a private operator was licensed. This was followed by the entry of a second national operator in 1998 and the incumbent fixed line operator in 2001. A fourth operator launched operations in 2008 and was followed by France Telecom. The results of these changes have been dramatic. Uganda was the first African country to have more mobile than fixed telephones. Its mobile phone density increased between 1995 and 2008 from 2 to 234 per 1,000 people. Given their low incomes, only about a quarter of the population has a mobile subscription. However, thousands of street vendors offer mobile access on a per call basis for Ugandans who do not have a subscription. Operators have made significant investments in infrastructure, particularly in rural areas with population coverage of over 90 per cent. Mobile communications have transformed the country socially and economically. Business and social contacts can be established and maintained more easily and over 100,000 people work in the mobile sector and related industries, including both direct employment by operators as well as indirect employment through the sale of air time or handsets

BROADBAND IN THE BAHAMAS

The Cable Bahamas broadband network now covers 96 per cent of Bahamian homes. Subscriptions are available with speeds up to 9 Mbps; the entry level package with 1 Mbps is around $11 per month, one of the cheapest in the region. The incumbent has reacted by providing broadband using ADSL. It too has installed an island-wide fibre network and is upgrading its infrastructure to an NGN. It is planning to offer television over IP. Apart from the increase in television entertainment and high speed Internet access for consumers, they are also offering online banking and online interaction with the government. Broadband in the Bahamas has had an impact on the overall economy. Infrastructure construction has generated employment and created new businesses in disaster recovery and backup (particularly important given the
number of hurricanes each year) as well as web hosting. The investment in broadband has also been important for the financial sector, one of the country’s largest industries. Banks have benefitted from having state-of-the-art connectivity for promoting offshore business and providing clients with easy and rapid access to accounts wherever they are.

Source: UNCTAD