[Ecommerce] (March 10, 2005) Economist: The real digital divide

[Thiru Balasubramaniam]

*This article mentions the Digital Solidarity Fund which is an output of
the WSIS process.


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http://economist.com/printedition/PrinterFriendly.cfm?Story_ID=3D3742817

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Technology and development*

*The real digital divide *
Mar 10th 2005
 From The Economist print edition



IT WAS an idea born in those far-off days of the internet bubble: the
worry that as people in the rich world embraced new computing and
communications technologies, people in the poor world would be left
stranded on the wrong side of a =93digital divide=94. Five years after the
technology bubble burst, many ideas from the time=97that =93eyeballs=94 mat=
ter
more than profits or that internet traffic was doubling every 100
days=97have been sensibly shelved. But the idea of the digital divide
persists. On March 14th, after years of debate, the United Nations will
launch a =93Digital Solidarity Fund=94 to finance projects that address =93=
the
uneven distribution and use of new information and communication
technologies=94 and =93enable excluded people and countries to enter the ne=
w
era of the information society=94. Yet the debate over the digital divide
is founded on a myth=97that plugging poor countries into the internet will
help them to become rich rapidly.


*The lure of magic*

This is highly unlikely, because the digital divide is not a problem in
itself, but a symptom of deeper, more important divides: of income,
development and literacy. Fewer people in poor countries than in rich
ones own computers and have access to the internet simply because they
are too poor, are illiterate, or have other more pressing concerns, such
as food, health care and security. So even if it were possible to wave a
magic wand and cause a computer to appear in every household on earth,
it would not achieve very much: a computer is not useful if you have no
food or electricity and cannot read.

Yet such wand-waving=97through the construction of specific local
infrastructure projects such as rural telecentres=97is just the sort of
thing for which the UN's new fund is intended. How the fund will be
financed and managed will be discussed at a meeting in September. One
popular proposal is that technology firms operating in poor countries be
encouraged to donate 1% of their profits to the fund, in return for
which they will be able to display a =93Digital Solidarity=94 logo. (Anyone
worried about corrupt officials creaming off money will be heartened to
hear that a system of inspections has been proposed.)

This sort of thing is the wrong way to go about addressing the
inequality in access to digital technologies: it is treating the
symptoms, rather than the underlying causes. The benefits of building
rural computing centres, for example, are unclear (see the article
<http://economist.com/printedition/displaystory.cfm?story_id=3D3714058> in
our /Technology Quarterly /in this issue). Rather than trying to close
the divide for the sake of it, the more sensible goal is to determine
how best to use technology to promote bottom-up development. And the
answer to that question turns out to be remarkably clear: by promoting
the spread not of PCs and the internet, but of mobile phones.

Plenty of evidence suggests that the mobile phone is the technology with
the greatest impact on development. A new paper finds that mobile phones
raise long-term growth rates, that their impact is twice as big in
developing nations as in developed ones, and that an extra ten phones
per 100 people in a typical developing country increases GDP growth by
0.6 percentage points (see article
<http://economist.com/printedition/displaystory.cfm?story_id=3D3739025>).

And when it comes to mobile phones, there is no need for intervention or
funding from the UN: even the world's poorest people are already rushing
to embrace mobile phones, because their economic benefits are so
apparent. Mobile phones do not rely on a permanent electricity supply
and can be used by people who cannot read or write.

Phones are widely shared and rented out by the call, for example by the
=93telephone ladies=94 found in Bangladeshi villages. Farmers and fishermen
use mobile phones to call several markets and work out where they can
get the best price for their produce. Small businesses use them to shop
around for supplies. Mobile phones are used to make cashless payments in
Zambia and several other African countries. Even though the number of
phones per 100 people in poor countries is much lower than in the
developed world, they can have a dramatic impact: reducing transaction
costs, broadening trade networks and reducing the need to travel, which
is of particular value for people looking for work. Little wonder that
people in poor countries spend a larger proportion of their income on
telecommunications than those in rich ones.

The digital divide that really matters, then, is between those with
access to a mobile network and those without. The good news is that the
gap is closing fast. The UN has set a goal of 50% access by 2015, but a
new report from the World Bank notes that 77% of the world's population
already lives within range of a mobile network.

And yet more can be done to promote the diffusion of mobile phones.
Instead of messing around with telecentres and infrastructure projects
of dubious merit, the best thing governments in the developing world can
do is to liberalise their telecoms markets, doing away with lumbering
state monopolies and encouraging competition. History shows that the
earlier competition is introduced, the faster mobile phones start to
spread. Consider the Democratic Republic of Congo and Ethiopia, for
example. Both have average annual incomes of a mere $100 per person, but
the number of phones per 100 people is two in the former (where there
are six mobile networks), and 0.13 in the latter (where there is only one).


*Let a thousand networks bloom*

According to the World Bank, the private sector invested $230 billion in
telecommunications infrastructure in the developing world between 1993
and 2003=97and countries with well-regulated competitive markets have seen
the greatest investment. Several firms, such as Orascom Telecom (see
article
<http://economist.com/printedition/displaystory.cfm?story_id=3D3750606>)
and Vodacom, specialise in providing mobile access in developing
countries. Handset-makers, meanwhile, are racing to develop cheap
handsets for new markets in the developing world. Rather than trying to
close the digital divide through top-down IT infrastructure projects,
governments in the developing world should open their telecoms markets.
Then firms and customers, on their own and even in the poorest
countries, will close the divide themselves.