1. The global ICT sector is extremely dynamic and transformational; there is virtually no "status quo".
Technology and especially the new ICT are in a state of constant, rapid change. Technological change has dramatically lowered the cost of ICT goods and services and expanded the range of technology choices and solutions. It has also stimulated the entry of new players – principally the private sector - and increased the opportunities for communities and the private sector to provide a range of services to the bottom of the pyramid populations. Our effort to examine the financing options facing developing countries as they facilitate the growth in the use and deployment of ICT recognizes that this process of transformation is likely to continue and the existing set of conditions may only be indicative of the future.

3. Experience shows that attracting investment in ICT depends crucially upon a supportive environment and a level playing field for business as a whole, and on an ICT policy and regulatory environment that encompasses open entry, fair competition and market-oriented regulation.
The explosion of ICT sector investment in most developing countries correlates closely with an improved environment for private investment to take place and the transformation of formerly closed, monopoly ICT markets to allow competitive entry. Where Governments have actively pursued an open, equitable market environment, investors have generally welcomed the opportunity to compete. The introduction and strengthening of independent, neutral sector regulation has helped to reinforce investor confidence and market performance, while enhancing consumer benefits.

5. Policy and regulatory incentives and more open access policies are also needed if private investment, CSO and community networks are also found to be effective in expanding ICT access to high cost (predominantly rural) and low income populations to address the "bottom of the pyramid" populations.
Addressing policy barriers, removing restrictions on competitive entry by ICT companies and local community network operators, and permitting the use of cost effective technologies (e.g. VOIP, and on unlicensed spectrum), and other innovative practices have been found to be helpful in moving the network frontier to address the needs of currently under-served populations. Continued cooperation between various development partners and stakeholders can also help in addressing the problems of providing rural access using new technological applications including wireless broadband devices, offering incentives to Internet cafes, phone shops and community communications networks.

The opening of markets and privatization of national telecommunications operators has led to an influx of tens of billions of US dollars into the ICT sector across many developing country markets, and has allowed access to fixed and mobile telephones, computers, the Internet, and other ICTs for over a billion people in the space of a decade and a half. Initially, the vast majority of this investment came from companies and institutional investors in the industrialized "North", pursuing expanded business and profit opportunities. The peak of "North-South" international investment in the ICT sector was around 1999-2000, following which the "crash" of the global telecom industry and of the "dot.com" boom resulted in significantly lower levels of new ICT investments in the developing world. This partly reflects the fact that many major investments (e.g., major operator privatizations and cell phone licenses) were already completed by 2000, combined with the drastically lower market capitalizations of major international technology companies and investment portfolios. Recent trends suggest that FDI is again increasing, and there remain numerous opportunities for foreign investors in developing country ICT infrastructure markets.

New investments by some of the major developing countries, such as Brazil, China, India, Malaysia and South Africa, and regional players combined with increasing reinvestment of existing operators, has continued to spur growth throughout the ICT sector, at rates that greatly exceed those in the developed world. Domestic companies, often financed by rapidly growing local financial and capital markets have been important in facilitating the growth of this sector in many countries.

Promising trends to build the domestic ICT sector in developing countries is also found to be dependent upon partnerships and cooperation between public, private, civil society organizations, community and financial stakeholders. These partnerships and investments have helped to mitigate risks, demonstrate market potential, enhance capacity, and stimulate demand for ICT. The support and development of local financial and capital markets, including capacity in new areas such as venture capital are also helping to spur entrepreneurship and innovation.

Whereas public financing of basic infrastructure costs, particularly backbone telecommunications networks, was previously a dominant component of MDB and ODA support for ICT development, the trend toward private investment in this sector was viewed as greatly reducing the need for direct donor and IFI financing of such government-owned infrastructure in the majority of developing countries. ODA and public investment on ICT infrastructure declined substantially since the late 1990s. The MDBs refocused the bulk of their public support on encouraging and implementing market-oriented policy reforms to help encourage new private investment. The MDBs and other donor-supported private financing vehicles (including a large group of bilateral institutions) also considerably expanded the level and scope of support for private infrastructure rollout¹. Some bilateral donors and selected MDBs have also been exploring ways to enhance their support to developing countries in advancing their infrastructure development through taking pro-active roles to stimulate private investment through the use of creative financial mechanisms, incentives, and partnership initiatives to reduce risk and catalyze investment particularly in "backbones" which given their 'public-good' nature can facilitate the delivery of services and stimulate other private sector investment.

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More than sixty countries have begun to establish Universal Access Funding mechanisms as a core component of their ICT development policies, to bring together financial resources in support of extending access beyond the market frontier. Successful models of UAFs introduced in Latin America and elsewhere have indicated that, when properly implemented in a competitive environment, these mechanisms can play a critical role in leveraging market forces to expand access to public telephone service, multi-purpose community telecenters, and other ICT facilities. Experience to date is mixed as this trend is very new in much of the developing world, and most countries are just beginning to address policy, regulatory, governance, institutional, and capacity issues required for successful management of these Funds. There are also possibilities for scaling up these funds through innovative financial mechanisms and schemes. Periodic assessment and evaluation of these mechanisms, together with other Universal Access development programs, can help define their future role in the sector within many countries.

In countries with relatively low population density and low per capita incomes (e.g. some of Africa's under-served sub-regions and Small Island States), financing constraints have become severe with neither the private nor the public sector being in a position to act alone. In these instances, regional infrastructures can also help serve national infrastructure in less developed regions, rural and under-served areas, and cost effectively leverage resources. In some cases additional partners can be brought into the process as well. Regional organizations and institutions can help facilitate cooperation and coordination and international financial institutions and donors can then play a vital role in seeding and facilitating the financing for such regional infrastructure projects. There is likely to then be increased market interest once the coordinated policy framework is in place.

While it is difficult to get an exact measure, it appears that many donors have also begun to increasingly shift their ICT program support toward the deployment of ICT within mainstream development projects such as health, education, and poverty reduction, while continuing to promote infrastructure development through ICT policy and regulatory reform-often through the provision of technical assistance and donor trust funds.

The overwhelming emphasis of ICT development and financing debate has focused upon infrastructure investments. However, ICT facilities and networks are ultimately only as valuable as the information and knowledge that they deliver to end-users. While there are many signs that the marketplace will eventually provide a variety of content and applications that can appeal to diverse populations, this segment has developed far more slowly than the supply of infrastructure and equipment. It would benefit from increased attention and creative initiatives across the developing world including expanding the public domain to ensure that knowledge can be disseminated where it is needed most and through providing support to community and local private sector for the development of locally adapted content. Also critical is the development of content and applications relating to the mainstreaming of ICT in the various development sectors, particularly in health, education and poverty reduction. These sectors while in a position to benefit from the use of ICT do not typically have budgets that would permit them to make the upfront investments required to leverage the gains of ICT for development.

New and innovative projects are being launched every day, and there are numerous encouraging examples of how strategic integration of ICT elements in development agendas can enhance education, health care, governance, business and job development, women’s opportunities, and crisis intervention. This trend of broad-based, local level experimentation should be encouraged, even though some initiatives will inevitably fail to meet the ultimate goals of sustainability, scalability, and replicability. Greater coordination of programs, experience, findings, and ICTD financing in general is needed particularly in the context of national poverty reduction and ICTD strategies, to maximize the potential impact of limited resources and accelerate development benefits and the global learning curve. Creating conditions that would facilitate more open access to low cost technologies and ICT networks can also help to make many of the community based approaches to the "last mile" more viable.

Public budgets in developing countries, however, are far from adequate to support wide-scale implementation of integrated systems although in the long run, efficiency gains should help offset the upfront costs of introducing new technologies. The international development community should thus actively consider the short- and long-term benefits to be gained from supporting selective public sector programs. Among the many target areas for ICT-based development interventions, the role of ICT in governance is arguably amongst the most crucial. In addition to the benefits of improved delivery of public and social services and increased participation, "e-governance" networks and facilities with multi-stakeholder partnership initiatives can help reinforce market opportunities, especially for start-up small and medium enterprises, as well as for service providers in remote locations while the proliferation of shared e-government programs and applications, stressing interoperability, sustainability and security, could help stimulate the development of domestic IT industries.

By their nature, ICTs depend upon, and reinforce, the knowledge and intellectual skills of those who use them. In the long run, a virtuous cycle of learning, innovation, adaptation, and growth can derive from access to expanding levels of knowledge and information, and the tools to take advantage of them. But for the overwhelming majority of people in developing societies, there are steep entry barriers to enjoying most of the benefits of advanced ICTs. With strong public awareness, basic education, specialized training, and other capacity building measures, everyone from young students and private employees to public officials can become active participants in the Information Society. Without this commitment to fundamental human resource capacity, however, the return on investment in hardware and software risks could be limited and the pace at which the digital divide is narrowed could be decelerated.

The demands on Government budgets and personnel in any country are always difficult, but in an area as dynamic and technically complex as ICT, public agencies and officials in the developing world confront an exceptional challenge. Public agencies must understand and embrace ICTs themselves before they can effectively integrate them in the range of development and poverty reduction strategies. Any realistic plans to pursue Information Society goals through strategic ICT policies must recognize the primary need for intensive and ongoing capacity building measures across the spectrum of these key public sector functions. In this important area, current trends suggest that available funding fall short of what is needed. Governments themselves have little budget flexibility to pay the added costs for training and high-skills personnel arising from new ICT policies and initiatives. Although donors, foundations, and the development banks support a wide variety of training and knowledge transfer programs as part of their ICT-related assistance, to date these have generally been insufficient to sustain the necessary levels of permanent capacity enhancement. Substantial increases in financial resources would be necessary, in most administrations, to establish capacity building programs commensurate with the goals and needs of effective e-governance and ICT sector policies.