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Economic Meaning of Economic Meaning of EmergingEmergingCommunication Technologies for Communication Technologies for CEE Countries and Baltic StatesCEE Countries and Baltic States
Jaroslaw K. PonderJaroslaw K. PonderMarket, 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
21. September 2004 2
AgendaAgenda
• ICTs in CEE Countries– Fixed Telecommunciations– Mobile Telecommunications– Internet
• Economic Meaning of ICTs in CEE Countires
• Policy Implications
21. September 2004 3
Fixed TeleFixed Teleccommunicationommunicationss in in CEECEE CountriesCountries
• 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 4
Modernization of the Networks Modernization of the Networks
• 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.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Czech Republic Estonia Hungary Poland Slovenia
Slovenia
Czech Rep.
Poland
Estonia
Hungary
0%
100%
200%
300%
400%
500%
600%
700%
800%
900%
1000%
1100%
1200%
1300%
1400%
1500%
1600%
1700%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Czech Republic Estonia Hungary Poland Slovenia
Digitalization (1991-2003)
Investment (1991-2003) Digitalization (2002)
Source: IBM (2003),
Sour
ce: I
TUSo
urce
: ITU
21. September 2004 5
Mobile Telecommunications in CEECsMobile 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 payfor 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 6
Telecommunication Market Telecommunication Market Segmentation in CEECs, 2002Segmentation in CEECs, 2002
46%
35%
39%
41%
39%
40% 54
%
50%
41%
42% 60
%
54%
49%
41,2
0%
40%
53% 57
%
48%
54%
49%
44%
39%
51%
51% 36
%
41%
45%
50,0
0%
0%10%
20%30%40%50%
60%70%80%
90%100%
CY CZ EE HU LV LT MT PL SK SI 1999 2000 2001 2002
Fixed Tel. Mobile Fixed Internet Data+LL
Note: * - Cyprus, Malta has been excluded, LL – leasing of lines.Source: PWC (2002), IBM (2003), own calculations.
21. September 2004 7
Data Transmission Services in Mobile Data Transmission Services in Mobile Telecommunications in CEECs, Telecommunications in CEECs, 20012001--20062006
Source: Ludwiczynski A. (2002)
Source: Ludwiczynski A. (2002)
21. September 2004 8
Internet DynamicsInternet Dynamics
Internet Users in CEECs (2003)
0,00 0,02
0,09
0,35
0,71
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
1999 2000 2001 2002 2003
Eastern Europe
Growth of DSL Subscribers in Eastern Europe (000s), 1999-2003
Eastern Europe Penetration Growth (DSL/100 phone lines, 1999-2003)
0.00 7.8033.10
124.10
455.50
0
50
100
150
200
250
300
350
400
450
500
1999 2000 2001 2002 2003
Growth in the number of Internet users
Source: eEurope+ NSO and Household Survey, June 2003
Source: eEurope+ NSO and Household Survey, June 2003
Source: www.point-topic.com (2004)
Source: www.point-topic.com (2004)
21. September 2004 9
Internet DynamicsInternet Dynamics
•eEurope+ NSO and Household Survey, June 2003; CY,MT and TR - National Surveys
Affordability of a PC relative to monthly household income
Average spending of internet access per month as percentage of
monthly household
•Source: eEurope+ NSO and Household Survey, June 2003
21. September 2004 10
Internet DynamicsInternet 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 11
Digital Divide: Digital Divide: European PerspectiveEuropean Perspective (2002)(2002)
Sources : ITU (2003), IBM (2003), EUROSTAT (2003) own calculations.
37,2%6,5%37,1%81,8%56,7%26.466EU-15 average
25,3%1,49%24,1%82,6%46,9%19233EU-3 average
56,1%1,45%19%82,2%45,9%20.700Spain
11,7%1,58%35%81,9%41,9%18.000Portugal
8,1%1,45%18%83,8%52,9%19.000Greece
EU 15 countries : poor
17,5%2,10%26,1%60,7%38,9%12620EU AC average
30,0%1,92%42%85%42,4%18.000Slovenia
18,4%1,65%16%54%27,2%12.200Slovak R.
8,5%1,89%23%35%34,7%9.500Poland
22,9%1,93%29%72%52,7%17.000Malta
7,0%1,77%20%47%26,8%8.400Lithuania
17,1%1,53%14%40%30,6%8.300Latria
10,8%2,57%16%68%35,4%13.300Hungary
21,0%4,68%41%63%35,0%10.900Estonia
14,6%2,48%30%84%34,8%15.300Czech R.
24,4%0,64%30%59%69,3%13.300Cyprus
EU AC countries
PCsInternet HostsInternet UserMobile Telephone
Fixed Telephone
GDP per capita, PPP
($)
21. September 2004 12
“Digital Divide” :“Digital Divide” :European Perspective European Perspective (2002)(2002)
47,7%
38,9%
60,7%
26,1%
2,1%
17,5%
72,7%
46,9%
82,6%
24,1%
1,5%
25,3%
100,0%
56,7%
81,8%
37,1%
6,5%
37,2%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
100,0%
GDP per capita, PPP (EU=€26.466)
Fixed Telephone Mobile Telephone Internet User Internet Hosts PCs
EU AC average EU-3 average EU-15 averageSources : ITU (2003), IBM (2003), EUROSTAT (2003) own calculations.
21. September 2004 13
IKT IKT Expenditures Expenditures in in CEECsCEECs (2002)(2002)
• 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. Czech Rep .
1 6 %
Hungary
1 5 %
Romania
10%
Slovakia Rep.
6 %
Bulgaria
4 %
S lovenia
4%
Pola n d
3 8 %
Lituania
3 %
Letonia
2 %Esto n ia
2%
Expenditures for ICT in Expenditures for ICT in CEECsCEECs, 2002 , 2002 (total 40023 Mill. €) (total 40023 Mill. €)
Expend.For ICT(Mill.€)
Share inCEEC
Market (%)
RelationICT/GNP (%)
ICTExpenditur
Per capita (€)
Romania 3916 9,8 8,6% 180,5Bulgaria 1700 4,2 11,4% 213,1Lituania 1086 2,7 7,5% 311,7Poland 15049 37,6 7,7% 389,5Letonia 951 2,4 10,6% 405,4Slovakia Rep. 2296 5,7 10,7% 426,8Estonia 804 2 12,6% 590,6Hungary 6111 15,3 10,2% 599,3Czech Rep. 6422 16 9,9% 623,9Slovenia 1688 4,2 7,9% 846,2CEEC total 40023 100 9,0% 387,2Western Europe total 592000 100 6,7% 1521,5
• 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.
Source: EITO (2003)
21. September 2004 14
Economic Meaning of Economic Meaning of TelecommunicationTelecommunication SectorSector
Source: IBM, 4th Report on Monitoring of EU Candidate Countries (Telecommunication Services Sector), Dec 2003
Size of telecommunications market compared with GDP, 2002
21. September 2004 15
Economic CatchEconomic Catch--up Processup Process: : Simulation Simulation
Years needed to Catch-up to the EU average Hypothetic Average Economic Growth Rates
EU AC countries GDP per capita, PPP ($)
2002 1% 2% 3% 4% 5%
Slovenia 18.000 39 19 13 10 8 Malta 17.000 44 22 15 11 9 Czech Rep. 15.300 55 28 19 14 11 Cyprus 13.300 69 35 23 18 14 Hungary 13.300 69 35 23 18 14 Slovakia 12.200 78 39 26 20 16 Estonia 10.900 89 45 30 23 18 Poland 9.500 103 52 35 26 21 Latria 8.300 117 59 39 30 24 Lithuania 8.400 115 58 39 29 24 EU AC average 12.620 74 37 25 19 15 Spain 20.700 25 12 8 6 5 Greece 19.000 33 17 11 8 7 Portugal 18.000 39 19 13 10 8 EU-3 average 19233 32 16 11 8 7 EU-15 average 26466
Source: Own calculations based on data from WDI (2002).
21. September 2004 16
Economic Meaning of ICTs in CEECsEconomic Meaning of ICTs in CEECs
Diffusion DeterminantsDiffusion Determinants
Economic Effects of ICTEconomic Effects of ICTInstitutional ApproachInstitutional Approach
Telecom Infrastructure and/or Usage
Economic Wealth
21. September 2004 17
Economic Meaning of ICTs in CEECsEconomic Meaning of ICTs in CEECs
• Diffusion of ICTs in CEECs– Muller, Salsas (2003) – Determinants of the Internet
Usage : internet hostsinternet hosts, income per capitaincome per capita, opennessopenness, educationeducation, politicalpolitical and civil freedomscivil freedoms, state of state of transitiontransition towards a liberalized telecommunications regime, the state of the telecommunications telecommunications infrastructureinfrastructure, cost of telephone
•• Internet usage costsInternet 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: tradetrade, company sizecompany size, computer usagecomputer usage, degree of the telecom market telecom market liberalizationliberalization
21. September 2004 18
Economic Meaning of ICTs in CEECsEconomic 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 Slovenia, Czech Republic, Hungary and EstoniaRepublic, 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 Czech Republic and EstoniaRepublic and Estonia, the most promising countries of region. The same structureThe same structure as developed countries.
21. September 2004 19
Economic Meaning of ICTs in CEECsEconomic 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-than-normal returns on investment due)
– Rajasalu, Laur (2003) – Estonia: low contribution of ICT sectors in Estonia´s output. The evidence of direct positive impact of hightech, 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 growthEconomic growth isisinfluenced more by indirect impact of ICTinfluenced 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 20
Economic Meaning of ICTs in CEECsEconomic 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 ICT using sector -- even 5 times bigger than in Europe and 2 times as big as in USA,
•• non ICT using sector non ICT using sector -- like in USA, •• ICT producing sectorICT producing sector - very small 1/10 of European or USA
achievements.
21. September 2004 21
Correlation between Correlation between IICTCT and and GDP per capita GDP per capita (ppp)(ppp)
HungaryCz. R.
Estonia
Slovak R.Poland
Bulgaria Slovenia
Greece
Romania
IrelandSpainPortugal
y = 1E-05x + 0,1999R2 = 0,5989
0%10%20%30%40%50%60%70%80%
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000
GDP pec Capita (PPP, $)
Fixe
d Te
leph
one
Den
sity
Lithuania
EstoniaCzech R.
PolandSlovak R.
Denmark
Ireland
Hungary
SloveniaGreece
PortugalSpain
y = 3E-05x + 0,006R2 = 0,7428
0%10%20%30%40%50%60%70%80%90%
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000
GDP per Capita (PPP, $)
Mob
ile T
elep
hone
Den
sity
Estonia
Czech R.Greece
Hungary
Portugal
Slovenia
Sweden
Ireland
Denmark
Poland
Spain
y = 1E-05x - 0,0085R2 = 0,5405
0%
10%
20%
30%
40%
50%
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000
GDP per Capita (PPP, $)
Inte
rnet
Use
r D
ensi
ty
Poland
Estonia
NetherlandsFinland
Czech R.Latvia
Hungary
Ireland
Sweden
Slovenia
y = 0,0023e0,0001x
R2 = 0,6295
0%
2%
4%
6%
8%
10%
12%
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000
GDP per Capita (PPP,$)
Inte
rnet
Hos
ts D
ensi
ty
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.
Fixed TelecommunicationsFixed Telecommunications Mobile TelecommunicationsMobile Telecommunications
Internet User per 100Internet User per 100 Internet Hosts PenetrationInternet Hosts Penetration
21. September 2004 22
Correlation Coefficients, (2002)Correlation Coefficients, (2002)
GDP per capita,
PPP ($)
Fixed Telephone
Mobile Telephone
Internet User
Internet Hosts
PCs
GDP per capita, PPP ($)
Pearson Correlation
1 ,759** ,752** ,542** ,358 ,723**
Significance (2-side)
,000 ,000 ,005 ,079 ,000
N 25 25 25 25 25 25 Fixed Telephone
Pearson Correlation
,759** 1 ,564** ,628** ,380 ,726**
Significance (2-side)
,000 ,003 ,001 ,061 ,000
N 25 25 25 25 25 25 Mobile Telephone
Pearson Correlation
,752** ,564** 1 ,506** ,237 ,518**
Significance (2-side)
,000 ,003 ,010 ,254 ,008
N 25 25 25 25 25 25 Internet User
Pearson Correlation
,542** ,628** ,506** 1 ,688** ,631**
Significance (2-side)
,005 ,001 ,010 ,000 ,001
N 25 25 25 25 25 25 Internet Hosts
Pearson Correlation
,358 ,380 ,237 ,688** 1 ,527**
Significance (2-side)
,079 ,061 ,254 ,000 ,007
N 25 25 25 25 25 25 PCs Pearson
Correlation ,723** ,726** ,518** ,631** ,527** 1
Significance (2-side)
,000 ,000 ,008 ,001 ,007
N 25 25 25 25 25 25
Note : ** The correlation is significant on the level of 0,01 (2-side).Source : ITU (2003), own calculations.
21. September 2004 23
Policy Implications 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 theprocess of creating of workable e-government the sequencing should play the most important role.
21. September 2004 24
Thank you very much for Thank you very much for your attentionyour attention
Jaroslaw K. PonderJaroslaw K. PonderMarket, Economics and Finance Unit Market, Economics and Finance Unit
Telecommunication Development Biureau Telecommunication Development Biureau International Telecommunication UnionInternational Telecommunication Union
Tel.: +41 22 730 59 10 Tel.: +41 22 730 59 10 EE--mail: mail: [email protected]@itu.int