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BROADBAND: threat of BROADBAND: threat of digital divide or digital divide or opportunity opportunity to to bridg bridg e e the the gap? gap? (The case of Hungary) (The case of Hungary) Dr. Iván SCHMIDEG [email protected] 15 th ITS Conference Berlin, September 2004.

BROADBAND: threat of digital divide or opportunity to bridge the gap? (The case of Hungary) Dr. Iván SCHMIDEG [email protected] 15 th ITS Conference Berlin,

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BROADBAND: threat of digital BROADBAND: threat of digital divide or opportunity divide or opportunity to to bridgbridgee

the gap? the gap? (The case of Hungary)(The case of Hungary)

Dr. Iván SCHMIDEG

[email protected]

15th ITS Conference Berlin, September 2004.

2004. SeptSchmideg 2

AgendaAgenda Indicators of implementing innovation Ability of implementation in international

comparison– Digital Access Indicator (DAI)– Networked Readiness Index (NRI)

Hungary’s rank and score– Threats of digital divide

Innovation theory to find methods of fostering the implementation of the broadband Internet

2004. SeptSchmideg 3

InnovationInnovation Significant innovations for the underdeveloped

– offer the opportunity of leapfrogging

but– involve the threat of further lagging behind.

The characteristic elements of the digital revolution (i.e. the digital broadband access) are significant innovations, with the inherent opportunities and threats.

2004. SeptSchmideg 4

Implementing innovationsImplementing innovations Growing interest in implementation issues:

– finding indicators to assess implementation,– the ability of implementing innovations,– methods of fostering implementation.

Innovation implementation will be analysed based on the well established innovation dissemination models (S curves)

2004. SeptSchmideg 5

Indicators of implementationIndicators of implementation Readiness indicators:

– issues of technical, and socio-economic infrastructures, legal environment necessary to support the activity (i.e . subscribers, skills)

Intensity indicators:– issues related to the state of application, the

size and nature of activity (i.e. percentage of e-commerce)

Impact indicators– issues related to additionality (substitution

effects, new value added, multiplier effects, efficiency gains, contribution to wealth creation, employment, skill composition,)

2004. SeptSchmideg 6

Assessment of implementationAssessment of implementation

Readiness

Intensity

Impact

2004. SeptSchmideg 7

Indicators of implementationIndicators of implementationReadiness (early adoption)

– Supporting technical, socio-economic, political infrastructure (penetration, skills)

Intensity (take off)

– Size and nature of activity (Internet usage, percentage of e-commerce)

Impact (maturity)

– New values added, efficiency gain, contribution to wealth, employment

2004. SeptSchmideg 8

Ability of implementationAbility of implementation Based on composite indices

– to model and measure a country’s relative development access and use of ICT,

– try to better understand a nation’s strengths and weaknesses with respect to ICT.

Two composite indices examined : – Digital Access Index (DAI) by the ITU– Networked Readiness Index (NRI) by the World

Economic Forum, World Bank, INSEAD

2004. SeptSchmideg 9

DAI componentsDAI components and and indicatorsindicators

DAI components Indicators

Infrastructure Fixed telephone subs. / 100Mobile cellular subs. / 100

Affordability 20 h / month of Internet access as % of GNI

Knowledge Adult Literacy School enrolment

Quality Int’l Internet bandwidthBroadband subs. / 100

Usage Internet users / 100 inhab.

2004. SeptSchmideg 10

NRINRI componentscomponents,, sub-components sub-components

Components Sub-components

Environment

Market Environment Political and Regulatory Environment Infrastructure Environment

Readiness

Individual Readiness Business Readiness Government Readiness

Usage

Individual Usage Business Usage Government Usage

2004. SeptSchmideg 11

Usage sub-component indicators Usage sub-component indicators

Sub- component Indicators

Individual Usage

Personal computers, ISDN subscribers, Cable television subscribers, Internet users

Business Usage

Computers installed in businesses, Firm-level technology absorption, Prevalence of foreign technology

licensing

Government Usage

Government success in ICT promotion,

Government online services

2004. SeptSchmideg 12

DAI ranks and scoresDAI ranks and scoresCountry Rank Score

Sweden 1 0.85

Denmark 2 0.83

Iceland 3 0.82

Korea (Rep,) 4 0.82

Norway 5 0.79

Hungary 36 0.63

Guinea-Bissau 174 0.10

Chad 175 0.10

Mali 176 0.09

Burkina Faso 177 0.08

Niger 178 0.04

2004. SeptSchmideg 13

NRI ranks and scoresNRI ranks and scoresCountry Rank Score

United States 1 5.50

Singapore 2 5.40

Finland 3 5.23

Sweden 4 5.20

Denmark 5 5.19

Hungary 36 3.74

Honduras 98 2.41

Angola 99 2.32

Haiti 100 2.27

Ethiopia 101 2.13

Chad 102 2.09

2004. SeptSchmideg 14

DAI and NRI rankingDAI and NRI ranking

2004. SeptSchmideg 15

EU countries EU countries DAI rankingDAI ranking

2004. SeptSchmideg 16

EU countries NRIEU countries NRI ranking ranking

2004. SeptSchmideg 17

HungaryHungary’s ’s rank rank and and score score Rank:

– 21, lower end in the EU countries. Score, relative to the best EU country:

– 74,1% calculating the DAI, – 71,5% calculating the NRI.

Rather modest ranking – closer look at the component indicators to

interpret the reasons.

2004. SeptSchmideg 18

DAI componentsDAI components

2004. SeptSchmideg 19

NRI componentsNRI components

2004. SeptSchmideg 20

Critical componentsCritical components DAI component

– Usage (Rank: 0,76; Score: 0,19)– Quality (Rank: 0,84; Score: 0,44).

NRI sub-components– Individual Usage (Rank: 0,72; Score: 0,39)– Government Usage (Rank: 0,53; Score: 0,50)

Indicators behind the critical components– Internet users / 100 inhabitants– Broadband Internet subscribers / 100 inhab.– Personal computers / 100 inhabitants– Government online services

2004. SeptSchmideg 21

Internet users in HU and EUInternet users in HU and EU

2004. SeptSchmideg 22

Internet subscribers HU and EUInternet subscribers HU and EU

2004. SeptSchmideg 23

Broad-band Internet usersBroad-band Internet users

AU, B, NL, FI, NL, SW

EL, IRL, IT, L, P, UK

2004. SeptSchmideg 24

PC users in HU and in the EUPC users in HU and in the EU

2004. SeptSchmideg 25

Signs of Digital DivideSigns of Digital Divide Similarity with the model based on the adoption

process among early and late adopters. – (H. Selhofer, T. Hüsing The Digital Divide Index – a

Measure of Social Inequalities in the Adoption of ICT Basis to calculate the “Digital Divide Index”)

The absolute distance (the "gap") between a risk group (country lagging behind) and the population (forerunner countries) average will increase during the take-off period of the early adopters and decrease once the late adopters have reached this stage.

2004. SeptSchmideg 26

Early and late adoptersEarly and late adopters

© empirica 2001

2004. SeptSchmideg 27

Threats of Digital DivideThreats of Digital Divide EU strategy give high priority to increase Internet

usage and broadband penetration. One of the strategic goals of FCC is broadband.

Hungarian Internet and broadband penetration may involve the threat of lagging behind the EU 15 average.

Other component values of the composite indices reveal better abilities, then reflected in the resulting composite indices.

Essential to find the reasons and remedies falling behind in Internet and broadband penetration. (Slow adoption rate of innovations)

2004. SeptSchmideg 28

Adoption of Adoption of anan innovation innovation

2004. SeptSchmideg 29

Tools: Tools: innovation theoryinnovation theory Target groups:

– early majority,– late majority

Rate of adoption is determined by the characteristics of an innovation, as perceived by the members of a social system:1. relative advantage2. compatibility3. complexity4. trialability5. observability6. security/reliability

2004. SeptSchmideg 30

Innovation theoryInnovation theory11

Relative advantage the degree to which an innovation is perceived as better than the idea it supersedes. It may be measured in – economic terms, – social prestige,– convenience, – satisfaction.

(cost benefit) Compatibility the degree to which an innovation is

perceived as being consistent with – existing values, – past experiences, – needs of potential adopters.

2004. SeptSchmideg 31

Innovation theoryInnovation theory22

Complexity the degree to which an innovation is perceived as difficult to understand and use.

Trialability the degree to which an innovation may be experimented with on a limited basis.

Observability the degree to which the results of an innovation are visible to others

Security/reliability

2004. SeptSchmideg 32

Reasons and remediesReasons and remedies11

Judging the relative advantages– is the price affordable, is it worth the offered

advantages? The offered advantages could be assumed as the contents attractive to the relevant user group.

Hungary:– High yearly telecommunications expenditure

relative to GDP • (Hungary: 6,5%; EU 15 average : 3,2%)

– High spending on telecommunications relative to the total household expenditure

• (Hungary: 4,74%; EU 15 average: 2,52%).

2004. SeptSchmideg 33

ICT expenditure to the GDPICT expenditure to the GDP

2004. SeptSchmideg 34

20 hrs Internet cost / mo (2003)20 hrs Internet cost / mo (2003)

2004. SeptSchmideg 35

Percentage of HH expenditure on Percentage of HH expenditure on communications (2001)communications (2001)

2004. SeptSchmideg 36

Reasons Reasons and remediesand remedies22

The market is legally completly liberalised since the 2001 Communications Act,

Fixed line penetration saturated at a rather low level (36 / 100)– household penetration is ~70%

The mobile subscriber density is high (82 / 100), – the household penetration is ~65%

The incumbent’s market share is ~78% The low fixed line penetration may hinder the

Internet usage

2004. SeptSchmideg 37

Reasons Reasons and remediesand remedies33

Regulatory (and/or state) intervention, competition can drive expenditures on electronic communications services lower.

Sensitive balance between two scenarios:– high costs, high revenue, incentive to invest,

spectacular increase in internet users, threat: the market pre-empted, de facto monopoly situation

– lower costs through competition, lower revenue, slower increase in internet users, threat: falling behind the global competition

2004. SeptSchmideg 38

Reasons andReasons and remedies remedies44

„PublicNet” program through public procurement to serve over 7000 broadband endpoints.

Attractive contents by several projects initiated to produce appealing Hungarian contents, but the real break through will be with the wide spread Governmental online presence.

2004. SeptSchmideg 39

RemediesRemedies11

Judgment of compatibility, broadband Internet is perceived as being consistent with the existing values, and needs, can be influenced by dedicated contents.

2004. SeptSchmideg 40

RemediesRemedies22

Complexity, the difficulties in usage can be favourably handled by – appropriate forms of school and grown up

education adopted to the special needs and circumstances (i.e. adapted to undereducated, to minorities)

– „Schoolnet” program (tax deduction after purchased PC for pupils)

– help in usage (i.e. the successful telehouse movement).

2004. SeptSchmideg 41

RemediesRemedies33

Trialability, the degree to which the use of broadband Internet may be experimented is served by – broadband Internet in all secondary schools– the Telehouse movement– the ambitious program of implementing and

running community access points.

2004. SeptSchmideg 42

RemediesRemedies44

Observability, the degree to which the results of the broadband Internet access and usage are visible to others – an important tool for opinion leaders in

persuading new adopters to accept this innovation

– community access points are important elements in this respect.

2004. SeptSchmideg 43

RemediesRemedies55

Security/reliability a more and more crucial issue, which needs outstanding – legal and educational handling – changing the still rather ignoring attitude of the

average Hungarian user.

2004. SeptSchmideg 44