Even after the popping of the Internet bubble in 2000, there has been a continuing and rapid increase in the use of the Internet by many developing nations. In spite of much writing about the “Digital Divide,” recent research by the International Telecommunications Union suggests that rates of growth of telephones, computers, and the Internet itself are higher in many poor countries than rich ones and the gap is closing. These gains can be caused by many factors – mobile telephones can easily increase capacity and cost less than fixed line phones, for example, and much of the recent gains in telephone coverage come from the mobile segment. Likewise, computer prices have continued to fall and now new low-end machines cost only $400 or less. Global PC sales in 2002-04 exceeded 500 million, bringing the global total close to 1 billion. A $400 price puts computers in the price range of televisions, which are widely used in many poorer nations. The Internet, with 5-6% penetration in developing nations, typically requires access to both a telephone line and a computer, though non-PC wireless technologies are just starting to become a factor in some developing countries. With the Internet, government policy is especially important since the costs of connection, amount of bandwidth (and thus ease of use), and degree of “filtering” of proscribed sites is usually under direct or indirect government control. Given the decline in costs, the biggest divide is often within a single country and due as much to government policies as other factors. In particular, the availability of telephone lines, cheap Internet connections, and Internet cafes or other public venues will often determine the overall availability of the Internet to middle and lower income families, though age and education are also important variables.
What policies are apt to promote the rapid diffusion of these critical technologies? To suggest an answer, this study analyzes the recent experience in three transition economies: China, Vietnam and Ukraine. These may seem an odd mix, since Vietnam is much the poorest of the three and Ukraine has had negative economic growth for much of the 1990’s, while Vietnam and especially China have grown rapidly. But all three were centrally planned socialist economies and all three, to different degrees, have introduced a market economy. All three started with an incumbent monopoly telephone company and all three have allowed different levels of competition in various segments of the telecom market. Yet the outcomes have been different, especially in terms of the growth in recent years.