Should advanced telecommunication services be considered a global public good?
José Luis GÓMEZ BARROSO
Dpto. Economía Aplicada e Hª Económica
Universidad Nacional de Educación a Distancia (UNED)
Pº Senda del Rey, 11. 28040 Madrid (Spain)
Jorge PÉREZ MARTÍNEZ
Dpto. SSR. E.T.S.I.Telecomunicación
Universidad Politécnica de Madrid
Ciudad Universitaria, s/n. 28040 Madrid (Spain)
Abstract
An international public good is a benefit providing utility that is, in principle, available to everybody throughout the globe. According to this definition, could advanced telecommunication services be considered a global public good?
Telecommunication services are non-rival goods which have important positive externalities. However, they are excludable goods. So, according to the standard definition, telecommunications have not traditionally been considered a public good. The arrival of the information society paradigm allows reviewing this assertion. “Convergent” services reinforce their global and public properties: network externalities grow as the club is now the whole world. Besides, telecommunications are increasingly becoming the basic tool for knowledge dissemination, “the most public of all public goods”. Once the necessary access is established, the services provided by electronic networks fulfil the basic characteristic of public goods: their usage by the next person represents basically zero costs for society. Then, adequate telecommunication access could be reasonably added to the global public goods list.
The provision of global public goods open a path that could have some interesting implications, mainly to consolidate the convenience and need for the programmes for the development of broadband networks, both at national and global levels.
Keywords
global public goods, externalities, non-rival goods, advanced telecommunications, broadband deployment
Résumé
Un bien public mondial est un bénéfice procurant une utilité sociale qui est en principe disponible pour tous à travers le monde. Selon cette définition, les services de télécommunication avancés peuvent-ils être considérés un bien public mondial ?
Les services de télécommunication sont des biens non-rivaux qui ont des externalités positives importantes. Cependant, ce sont des biens excluables (on peut exclure un usager). En conséquence, selon la définition habituelle, les télécommunications n’ont pas été traditionnellement considérées un bien public. Avec l’arrivée du paradigme de la Société de l’Information, il est possible de réviser cette affirmation. Les propriétés globales et publiques des services “convergents” sont renforcées : les externalités de réseau augmentent car le club est maintenant le monde entier. En outre, les télécommunications deviennent de plus en plus l’outil de base pour la diffusion de la connaissance, “le plus public de tous les biens publics”. Une fois que l’accès nécessaire est établi, les services fournis par les réseaux électroniques manifestent la caractéristique de base des biens publics : leur utilisation par une autre personne représente des coûts presque nuls pour la société. Donc, un accès adapté aux réseaux de télécommunication peut être raisonnablement ajouté à la liste de biens publics mondiaux.
La fourniture de biens publics mondiaux ouvre une voie qui pourrait avoir quelques intéressantes implications, principalement de consolider l’intérêt et la nécessité des programmes pour le développement des réseaux à haut débit, tant au niveau national que international.
Mots clés
biens publics mondiaux, externalités, biens non-rivaux, télécommunications avancées, développement des réseaux à haut débit
Should advanced telecommunication services be considered a global public good?
1.Introduction
Telecommunications access has been a major target of governments during the last century in practically every country in the world. This suggests that the benefits of a large connection to telecommunication services have been perceived regardless of the political option in power. Thus, every government has considered that there is (at least) one cause that justifies State intervention in the industry’s activities.
The set of causes (“market failures”) that can justify State intervention in any economic activity sector is limited. Stiglitz (1988) makes an in-depth analysis of these causes and identifies up to eight (which are neither mutually excluding nor independent), that can be regrouped into four major categories: those inherent to the characteristics of the good itself (public goods, merit goods and externalities), those referred to the market situation (imperfect competition, that includes information failures, and incomplete markets), macroeconomic arguments (economic development) and those driven by equity reasons.
If we analyse the presence of market failures in traditional telecommunication services, we conclude that almost all arguments are useable, to different extents[1]:
strictly speaking, telecommunications cannot be considered as a public good, although they may be considered as a “mixed” good
there is no doubt that they provide positive externalities
there are sufficient arguments to include them in the merit goods group
it is not clear whether the market itself develops conditions for competition, or whether it can reach everyone, at least in the short term
they are taking on, and will further do so in the future, a key role in economic development
their importance seems to be sufficient to reach everyone based on an equity criterion
At present, the hope for access generalization referred to the advanced services[2], acquires, however, a new dimension. The expression of the paradigm known as the Information Society boosts the importance of advanced telecommunication services by turning them into the cornerstone of what seems will be a new socio-economic construction. This does nothing other than strengthen several of the previous arguments: their influence in economic development or their consideration as merit goods. However, could telecommunications be considered a global public good as well?
First, we analyse, sections 2 and 3 respectively, the public and global characteristics of telecommunications, especially those of advanced services provided by broadband networks. The following section examines an additional reasoning, namely, considering telecommunications as a “necessary tool” for the provision of other public goods, and specifically, for knowledge dissemination. Adding this argument to the results of previous analysis, we can conclude that there are reasons to qualify advanced telecommunication services as a global public good. Cataloguing advanced services as a global public good should back plans for broadband networks deployment, and more specifically, should imply the creation of instruments designed to assist developing countries in the development of their infrastructures.
2.pUblic CHARACTERISTICS of TELECOMMUNICATIONS
Traditional telecommunication services do not meet the first of the two conditions which define a public good: in case of non-payment, a specific customer can be “disconnected” from the network with an almost zero cost. Even without disconnecting a user, a second level of exclusion can be implemented, by limiting the numbers they can call. Note however, that this statement can be qualified: disconnecting someone from the network does not prevent them from accessing the service as long as public telephones are available.
On the other hand, it does meet the second characteristic of a public good, although sometimes impartially, due to the limitations defined by system congestion restrictions. Generally, anyone can access the network, provided sufficient capacity is available, and its usage does not reduce its usefulness for the remaining users when there is no congestion (Yannelis, 1999). However, the probability of previously established users suffering problems caused from adding new ones to the network is small, since telephone networks are designed to handle peak demands and therefore, except in specific moments of maximum demand, they provide important capacity surpluses. This can also be qualified: a telephone service could be defined as rivalrous should several customers wish to contact the same number simultaneously.
How does this situation change for advanced services?
“Architecturally” speaking, as regards the exclusion, access to contents and services through the Internet is considered as a non-excludable good (Spar, 1999). Naturally, a connection is required (a line and a terminal; usually, a computer) but, as opposed to the telephone, payment for establishing the communication is not indissolubly linked to the service that is being accessed. Thus, if in the case of telephone service, “public” solutions were imperfect (calls cannot be received), in this instance they are absolutely valid. The connection’s role becomes more instrumental, as could be the need to use a vehicle to drive along a highway which, in turn, does not cease to be normally considered as an example of public good.
However, this does not mean exclusion is impossible. A password or, for certain services, the need to purchase a decoder, prevents from accessing specific contents, thus eliminating that underlying information’s characteristic of being a publicly available good.
Regarding the rivalry issue, any number of users can simultaneously interact in cyberspace. By constructing the necessary physical infrastructure (adding servers, increasing the capacity of the transmission systems), all new users have to do is join the existing system. Nevertheless, considering current infrastructure conditions, congestion is more severe at present. Although the physical network grows, it is not infrequent to experience delays, in part because the number of users is growing rapidly, and in part because the volume of the information exchanged is ever-increasing (Spar, 1999). The commercial widespread of technological solutions providing greater bandwidths seems to be effectively satisfying the growing demand. A solution against rivalrous consumption consists in the definition of different levels of service, allowing users that are willing to pay more to be given a special treatment[3].
The conclusion is that, generally, services provided by congestion-free electronic networks provide the basic characteristic of public goods: once established, their usage by the next person represents basically zero costs for society (Hallgren and McAdams, 1995). However, although their basic underlying architecture operates naturally as a public good, many of the usages that have been developed break the public space into private scenarios where access can be conditioned.
According to the definition by Musgrave and Musgrave (1989), the terms social or public good would be applicable to non-rival consumption, even in the case it was accepted that exclusion was possible. Actually, and considering the eventual congestion, the best definition would be that of a mixed good or that of a impure public good.
3.global CHARACTERISTICS of TELECOMMUNICATIONS
Any telecommunications service presents two types of positive externalities: “external ones”, that appear outside the service itself favorably influencing other productive activity sectors, and “internal ones” (linked to their own consumption) that result from being network-based activities.
The general definition on why club externalities exist is quite simple[4]: since telecommunications networks provide interaction between all users, each new subscriber benefits from (and is prepared to pay for) accessing a group of pre-existent users, while offering a new possibility for communication (actual or potential) to that group of connected customers. These “social” benefits are not taken into account by the individual user when considering the possibility of joining the network. It can occur that the additional benefits the existing customers would receive should the “marginal” customer join the network (maybe discouraged by a costly subscription fee, not necessarily above costs) exceed the losses the company would incur-in should it reduce the subscription fee to attract that customer. However, it is not easy to include in the network the benefits provided by a new user: there may be many potential beneficiaries, but not all of them can know each other and, even if that were so, it would be difficult to reach agreements; additionally, those transaction costs could exceed the benefits provided by the externalities (Littlechild, 1979).
Some authors also consider network externalities those that result from the fact that users who do not initiate communications also benefit from a certain utility despite not having paid for the service (Bar and Munk Riis, 1997; Cave et al, 1994).
A second type of network externalities are those considered “indirect”. Individual usefulness is not only a direct consequence of the number of users, but an indirect one as well, since it also depends on the amount of services available, which represent a portfolio that grows in parallel to the number of users that allow to achieve a return on them[5].
In new services, the club characteristic is extraordinarily strengthened. With the telephone, the group one interacts with is basically limited to personal or work-related circles, with a highly improbable chance of communicating with “strangers”. However, whoever enters, nowadays, in a chat room, an interactive game or a forum does not know, most of the time, any details of their interlocutor, maybe not even their nationality. The group of users receiving some sort of actual usefulness by the connection of a new member is, thus, really unlimited and, surely, it is much more important than with traditional services.
In the previous paragraph we have referred exclusively to communicating. However, each individual or institution connecting to a network can also, in addition to communicating, make public all sorts of information, which takes us to the next argument.
4.TELECOMMUNICATIONS AS A TOOL
The outcome of the two previous sections provide solid proof that advanced telecommunications could be considered as public, as well as global, goods. It would be convenient to underline at this moment an additional argument: advanced services are a “necessary tool” for the enjoyment of other goods.
As regards public services, a “tool good” idea is used by Taylor and Webster (1996). Their reasoning is that as the “age of information” progresses, more public services will be electronically provided, and if the historical obligation of covering them must be maintained, then access to telecommunications turns into a sine qua non condition. Additionally, if the networks must be prepared to provide everyone with the same service, a commitment to homogenize a high quality infrastructure appears.
However, the basic idea is the one considering telecommunications as a tool for the dissemination of the most global among the global public goods. This public good would be information, or from a broader perspective, knowledge. Knowledge is a “global public good” because the marginal cost of a new individual receiving it is zero, while its advantages are geographically unlimited; although some sort of exclusion, which would transform it into an impure public good, is possible, it would not be desirable due to that absence of marginal cost (Stiglitz, 1999). But, and here is the role of the tool, for a country, the adaptation and creation of new knowledge is as essential as its dissemination, which is affected by the effectiveness of its communications system.
The importance telecommunication services have at present, and will further have in the future, for information access, exchange, generation and dissemination, seems, without any doubt, undeniable. Using Conceição’s methodology (2003), we could establish that the underuse of this knowledge would be caused by access problems specified in the underprovision of adequate connection resources.
5.Conclusions
An international public good is a benefit providing utility that is, in principle, available to everybody throughout the globe (Morrissey et al, 2002). According to this definition, advanced telecommunication services can be considered to be a global public good.
This nature would be backed by the fact of them serving as a necessary “tool” for the provision of another public good: knowledge, the dissemination of which is becoming progressively more dependent on telecommunications networks.
Be it because of their own characteristics or their instrumental role, the truth is that telecommunication services deserve to be treated as a global public good. This fact would have several implications, specifically that service provision should reach an adequate level and ideally should be accessible to everyone.
The financing of public goods involves the use of policy tools (financial as well as nonfinancial) to facilitate an adequate flow of public and private resources to these goods. Advanced telecommunications are able to attract considerable private financing and investment in broadband will mainly come from the private sector. The public sector must help create a favourable environment and stimulate demand. However, since it is unlikely that operators will maintain any interest outside grouped-and-profitable-customer-filled urban areas, isolated and rural areas may have to wait quite some time until they can enjoy, not the arrival of effective competition, but any broadband connection. So, governments must also take action on the supply side of the market.
This is a problem faced by developed countries, since they need to avoid the extension of the digital divide which threatens leaving their remote or depressed regions behind. Arguments used to back plans for the development of enhanced telecommunications infrastructures are almost always too vague. Frequently, their positioning is based on the resource to using scarcely rigorous terms such as “social importance”. The awareness of the role of advanced telecommunication services as a necessary tool for the provision of global public goods would consolidate the convenience and need for those programmes.
However, this problem is especially serious in less developed countries. When the national sector is incapable of meeting such needs, subsidies and loans become the primary, if not the only, solution. Indeed, when viewed from the production side, global public goods can be seen as the sum of national public goods (the largest part of global public goods financing is national) plus international cooperation (Kaul et al, 2003).
International funding institutions must direct targeted assistance towards the development of countries which are at the bottom of the teledensity scale by providing guarantee mechanisms ensuring the existence of programmes contributing to enhance telecommunications penetration. Besides, programmes fostering a general economic development must allocate special importance to telecommunications.
Nonetheless, more specific actions are required. The WSIS Declaration of Principles (WSIS, 2003) calls for digital solidarity, both at the national and international levels (Item 17). However, the section dealing with international cooperation represents no more than a simple declaration of intentions[6].
Thus, the future of said voluntary fund[7] depends on the generosity of the richer states. Keeping the Digital Solidarity Fund under the “aid” umbrella would probably lead to poor results. Without the richest countries becoming aware of the advantages they would receive by supporting these actions, the chances of building a policy that proves actually effective are very small. The provision of global public goods open a path that can transform a perspective of discretional and insufficient donations into a cooperation model based on self-interest for the global development of the networks.