|Europe II 2002
|Bridging The Digital Divide
|Minister, Informatics and Communications
Hungary is transforming itself into a knowledge-based economy. To bridge the digital divide so its population can take part in the information society, Hungary must increase Internet usage, particularly through broadband access, and foster greater competition in fixed telephony. The government has distributed PCs to key groups, but there is no infrastructure in many regions for these to acce ss the Internet. Hungary, soon to join the EU, must find ways to subsidise development of its telecommunications infrastructure within EU rules.
As Hungary is poor in energy resources and raw materials, the only way for the country to develop is to promote a knowledge-based economy. A pre-condition of this is a state-of-the-art telecom infrastructure with sufficient capacity that is accessible anywhere and on which IT services can be established. Without such an infrastructure, high-quality IT education and the comprehensive preparation of the labour force and the population for the use of IT tools cannot function efficiently. The Hungarian Government gives substantial emphasis to its programme promoting Hungary’s transformation into an Information Society. The programme draws attention to the fact that the great majority of our society does not yet enjoy the benefits of information technology, and the threat of a widening digital divide exists. Hungary’s present government, which took power in May 2002, established a new Ministry of Informatics and Communications. The communications branch has the mission of laying the grounds for the telecommunications needed to support an Information Society, and of making sure that the access to information is fast, widespread, affordable and high quality. Consequently, the government has announced two basic objectives for telecommunications during the current government cycle: * To promote the growth of Internet penetration and, in particular, increase the share of broadband access to the Internet; * To foster greater, more intense, competition within the fixed-line market. The present Today, roughly 75 percent of all households are connected to the fixed-line network. The Communications Act requires that, within the framework of universal telecommunication service, lines technically capable of data transmission at a speed of at least 9.6 kilobit/second be provided. Nevertheless, the majority of old telephone lines – several hundred thousand of main lines, according to estimates – are only capable of 2.4 kilobit/second. In addition, some 150 thousand subscribers are connected to the network by wireless local loops that cannot provide functional data transmission. In light of this, it is no surprise to learn the unfortunate fact that a substantial part of the groups especially targeted by the government’s Information Society initiatives cannot use the Internet due to the lack of the appropriate local infrastructure. Many of these groups – civil servants, teachers, judges, public servant physicians, etc. – have been provided with PCs, paid for with government funds, as part of Hungary’s drive to prepare for the Information Society. The expansion of subscribers exchange capacity and the cost-optimisation of the fixed-line telephone networks led to a cut in the number of exchanges and therefore – due to the expanded exchange coverage – to an increase in the average length of the local loop. The cost of this was higher than that in Western Europe because population density and telephone penetration is significantly lower. The longer local loop had two consequences: · Monthly telephone subscription fees have risen so much due to loop maintenance costs that many can no longer afford telephone service. This has reduced telephone penetration, which is now far below that of the Western European average – it peaked at 37 per 100 citizens. Fixed telephony penetration is still declining. · In proportion, the number of lines that are suitable for ADSL is smaller than typical in the rest of Europe. The cable network, designed primarily to distribute television-programming distribution, is a fixed-line infrastructure but uses a different technology than that primarily designed for telephony. Today, a quarter of all households are connected to the TV cable network. In many cities the cable system has already been adapted to deliver rapid two-way data transmission. However, the majority of systems – especially in smaller communities – do not yet have this capability owing to the limited number of potential customers. Although GPRS enabled handsets make Internet access possible, the GSM radio-telephone networks that are available today cannot be considered to be true broadband systems. The introduction of UMTS systems capable of broadband data transmission is not expected before 2005 due to business considerations. There are other radio solutions available today, but these are not widely available to the public and do not offer broadband Internet access at a reasonable price. Nevertheless, there are examples of radio solutions that meet limited needs. These are based on 2.4-gigahertz local distribution networks that are connected to the Internet through a network unified by a satellite – VSAT – system. This solution works well in sparsely populated rural areas. In Hungary, there are more or less 360,000 users with dial-up Internet connections. Only 40 thousand or so users have broadband connections (ADSL cable-modem or radio) to the Internet. It is clear to see, that in a country of 10 million, there is space to improve. Now let’s examine what tools are available to reach our goals and increase Internet penetration and broadband Internet access. First of all, the demand side can and must be motivated. · As part of the solution we introduced two subsidised Internet access packages (KezdoNet or BeginnerNet and HaladóNet or AdvancedNet). We negotiated with the service providers to grant special discounts to users of these packages. · As another tool to expand access to information technology and the Internet, we continue by way of tenders to help target groups – teachers, youth institutions, local governments etc. – by providing them with PCs and Internet access. The appliances and services for this are purchased through public procurement. · Based on an initiative of the ministry, tax legislation has been altered so that employers can provide PCs and Internet access to their employees as tax-free payments in kind. · As an indirect motivation, to increase demand, we help through tenders using government funds, to provide the cultural benefits and services of government on the web. This mechanism serves also in our fight to eliminate digital illiteracy and to promote IT education and tele-work. Despite all our efforts, it is futile to motivate demand in regions where the infrastructure that provides Internet access has not yet been built. In Hungary telecommunication services are provided on a paid – for profit – business basis. Consequently, supply is likely to be present in only regions where the number of potential customers is great enough for at least one service provider to earn a reasonable return on investment, where there are adequate means to maintain the infrastructure and sufficient potential profit operate the service safely. In these regions, where the infrastructure pays for itself and generates profits, there is no need for government subsidies. Subsidising the building of infrastructure, alone, is not enough in many regions. There are regions where the market cannot generate sufficient income to pay, at the very least, to maintain the infrastructure let alone generate the profits necessary to sustain the operation and growth of the service provider. Unless the operations of such systems built from public funds are subsidised, they will – sooner or later – deteriorate. The state’s ability to bear this burden is limited. The state’s task can only be to strive to decrease the threat that these regions will terminally fall behind by creating and maintaining public access points. We launched the so-called “public net” programme to carry out this task. It aims to build a country-wide infrastructure, connected to the government’s backbone network that will provide broadband access to each community in the country. Local governments, schools, libraries and other public institutions should all connect to it, as can “telehouses” that provide public access. The equipment and services needed to build and maintaining the public net will be purchased through public procurement. The only question remaining is what we can do with the regions where there is chance that there will be enough potential customers for the successful maintenance of an infrastructure built from subsidies. The EU’s solution to this problem is not simple at all. The European Economic Community was created by the Treaty of Rome whose Title V declares that it is irreconcilable with the community’s market that member states or any state funds provide money that favours certain companies or the production of certain products, thereby distorting or threatening competition. Because of this Article the service provider operating in the region cannot be directly subsidised when building the necessary infrastructure. However, even the EU acknowledges the legitimacy of the programme to help the regions catch up. If the desired goal is high enough on the priority list to appear in the National Development Plan, in addition to allocating government funds to it, then the EU will also contribute to such programmes from its Structural Funds. That is why we intend to include an operational programme in the National Development Plan for the subsidised building of a broadband-access infrastructure in those regions that do not yet have them for lack of commercial interest or motivation. Conclusion The rules for using budget funds to promote regional development make it possible, through the country’s tender system, to use these funds for telecom and IT goals. A pending modification of current legislation will extend this opportunity to small regional tender systems as well. The EU’s solution is that, as long as local governments have sufficient funds of their own, they can apply for both state and EU tenders to provide funds to build the infrastructure for regional development; if such contribution is sufficient, they can choose through public procurement the service provider that will build and operating the infrastrucutre.