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ITU Strategy and Policy Unit News Update 
Policy and Strategy Trends

Issue 1: January - March 2002

In this edition
Upcoming events  
Reinventing Telecoms  
Improving IP connectivity in the least developed countries  
ITU New Initiatives Workshop: Questionnaire on possible topics for 2003  

Welcome to the latest news from the ITU Strategy and Policy Unit

The Strategy and Policy Unit (SPU) of the International Telecommunication Union (ITU) is pleased to introduce the first edition of the SPU News Update: Policy and Strategy Trends. This first edition was prepared in collaboration with the Telecommunication Data and Statistics Unit of the ITU Telecommunication Development Bureau (BDT), and provides an overview of the new World Telecommunication Development Report: Reinventing Telecoms, which was released at the World Telecommunication Development Conference held in Istanbul in March 2002. PDF format

1. Upcoming events

May 20-22 2002 (Seoul, Korea): Workshop on Creating Trust in Critical Network Infrastructures

2. Reinventing Telecoms: The new telecommunication world: At a new crossroads

By the beginning of 2002, more  than half the countries in the world had fully or partially privatized their incumbent telecommunication operator (see Figure 1). Competition has spread widely, although a majority of countries still retain monopolies in fixed-line services, such as local and long distance calls. However, an overwhelming majority of countries now allows competition in the mobile and Internet market segments, which increasingly substitute for fixed-line voice.

Mobile: raising access to communications

With just short of one billion subscribers at the end of 2001, mobile is poised to take over from fixed lines in the early part of 2002 as the network with the most users (see Figure 2). By the end of 2001, over 90 per cent of countries had a mobile network, almost one in every six of the world’s inhabitants had a mobile phone and almost 100 countries had more mobile than fixed telephone subscribers (see Figure 3). Mobile has raised access to communications to new levels. In developing nations, and particularly in the least developed countries (LDC), mobile is increasing telephone access surprisingly rapidly. The mobile revolution in developing countries is easily explained by the ease with which mobile networks can be installed. But another key element is the availability of prepaid cards. Among populations which would not meet the financial criteria for subscription-based services, prepaid can bring communication to the masses.

Even in developed countries mobile is gradually substituting fixed — primarily among the lower-income segment of the population. This trend implies that mobile, rather than fixed, is the key to achieving universal access goals and other social policy objectives.

The new digital divide

In 1991, total telephone penetration (fixed-line plus mobile telephones) stood at 49.0 in developed nations, 3.3 in emerging nations and just 0.3 in the LDCs. A decade later, the corresponding levels stood at 121.1, 18.7 and 1.1. However, while the ratio between developed nations and emerging ones has halved, between emerging nations and LDCs it has actually grown (see Figure 4). The new digital divide is expressed in the growing gap between these countries and the LDCs, especially in terms of access to Internet (see Improving IP Connectivity in LDCs).

In the left chart, 1982–2001 is based on real data and 2002–2005 on projections. In the right chart, the 97 countries
that are shaded had more mobile users than fixed lines, as at year-end 2001.

The new digital divide is harder to measure because it is not just about access to the Internet, but also about the quality of the experience. For instance, international Internet bandwidth (or IP connectivity), which is a determining factor in response times, is a good measure of users’ experience with the Internet. The 400 000 citizens of Luxembourg between them share more international Internet bandwidth than Africa’s 760 million citizens. The reality is that high-speed (broadband) Internet access, which has become fashionable in many parts of the developed world, is still a long way off in most developing countries. The new digital divide is about quality, not just quantity.

However, the Internet is of little use to people who are unaware of how access to electronic information can improve their lives, or who do not know how to use the equipment. Training and locally relevant content will therefore be key factors in bridging the divide. Moreover, there is a shortage of compelling research and examples of how ICTs can transform the development process. Effective solutions will require a triumvirate pact between governments, development agencies and the private sector.

Recipe for reform: privatization, competition and independent regulation

Although many different recipes for reform have been followed, most countries have included three basic ingredients in their reform programme: private sector participation, market competition and creation of an independent regulatory body. Table 1 shows those economies that experienced the greatest change in ranking (up or down) for total teledensity (the sum of fixed lines and mobile users per 100 inhabitants) between 1990 and 2000. Among those that succeeded in improving their status are many economies that began reforms early in the decade, like Chile, Hungary or the Philippines, as well as several that started more recently, like Botswana or Morocco. The stand-out cases are China and Viet Nam, which both followed a strategy of encouraging competition between different government ministries as well as private sector investment in their mobile sectors. When a government is truly committed to telecommunications investment, it can make a big difference relatively quickly.

The industry in 2000 was worth almost a trillion US dollars in terms of service revenues, but the acceleration in telecom growth rates was reversed in 2001, notably in key market segments such as mobile and Internet. Share prices declined precipitously, and expected profits turned to losses for many of the new market entrants. The sector was left reeling, and wondering what went wrong.

While the recent diagnosis might be one of doom and gloom, the phenomenal growth of the late 1990s should be seen in a historical context, as a wave of change which only happens every fifty years or so (see Figure 5). It was the result of the confluence of rapid technological change with a shift in market expectations, in this case associated with mobile overtaking fixed-line networks, with data overtaking voice, and with widespread implementation of sector reform.

The gale of creative destruction currently blowing through the industry will bring misery to some, but opportunity to many more. Above all, for telecommunication users, who will soon form the majority of mankind, a new age is dawning in which scarcity is being replaced by plentiful and ubiquitous supply. That is telecoms reinvented!

3. Improving IP connectivity in the least developed countries

Breaking the vicious circle of poverty and high prices

ITU is currently looking at ways to improve Internet penetration in the least developed countries

Despite the fact that some 264 countries now have Internet access, the Internet is still a rare privilege in the least developed countries, where just two in each thousand members of the population has Internet access — far less than the average of one in twenty for other developing countries and, as might be expected, way below the one in four citizens who have Internet access in some major economies.

The reasons for this disparity lie not only in the extreme poverty of LDCs, but also in the scarcity of economic, institutional and human resources, often compounded by geophysical factors. The Internet, with its requirement for high-quality, high-speed connections, places heavy demands on infrastructure. In most of these countries however — especially in landlocked territories or remote islands — national and international Internet connectivity is in short supply: optical fibres may not be available, satellite links are limited and expensive, and internal telecommunication infrastructures are typically concentrated in a few main cities and present severe shortcomings in rural areas. These obstacles, together with lack of clear telecommunication policies and regulations and an internal market that is often closed to competition, result in a lack of investment and highly-priced services, all of which impede Internet penetration.

ITU is currently considering a project to enhance Internet connectivity in the LDCs, as a practical step towards bridging the digital divide. One of the main objectives of the project is to increase the bandwidth capacity of Internet service providers (ISP) in the LDCs through the use of satellite technology (e.g. very small aperture terminals, or VSAT). This is to be achieved by “pooling” demand for Internet bandwidth among the countries concerned, and helping to finance the purchase of satellite capacity by ISPs to enable them to provide lower-cost access to end-users, schools, hospitals and other entities. The ISPs would undertake to respect certain conditions and requirements (e.g. number of communities covered, reduced price of services for non-commercial end-users and cybercafés, etc.). In the longer term, connectivity should be self-financing after the project has terminated.

Establishing a reliable infrastructure that can enable access to international Internet capacity at low cost could be the first step towards breaking the “vicious circle”, and creating a “virtuous [Internet] circle” in LDCs. For further information, visit the website at:

4. ITU New Initiatives Workshop: Questionnaire on possible topics for 2003

Reminder: All member states and sector members are reminded that the deadline for sending in your responses to the ITU New Initiatives questionnaire on possible topics for 2003 is May 30 2002.

For further information on Policy and Strategy Trends, please contact: ITU Strategy and Policy Unit, International Telecommunication Union, Place des Nations, CH-1211 Geneva 20 (Switzerland). Fax: +41 22 730 6453. E-mail: . Website:


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