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Deregulation and Enterprization in Central and Eastern Telecommunication - a Benchmark for the West?

Christian von Hirschhausen

No 145, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The restructuring of telecommunication in Central and Eastern Europe occurs at a time when the classical structures of telecommunication are falling apart worldwide. Coming from the socialist system in which telecommunication did not exist as an independent economic activity, the Eastern European countries have created specific "post-socialist" modes of reform, often outdoing Western countries in terms of speed and radicality. Deregulation and enterprization have dominated the process in all countries, leading to advanced technical standards and a wide segmentation of telecommunication markets. The role of foreign direct investment and technology transfer was particularly important. But the reforms also lead to an increasing social gap between the prosperous users of advanced telecommunication services, and the average citizen for which even telephony has become a luxury good. Our thesis is that CEE telecommunication reform, rather than copying Western models, may become a benchmark for the West, in particular for Western Europe. Technically, the advanced reform countries in Central Europe are about to succeed the leapfrogging process, i.e. the jump from post-war socialist technologies to world-leading edge-of-technology standards. With regard to industry structures, Central and Eastern European countries show that the age of "classical" integrated telecommunication activities is definitely over. Instead, most diversified telecommunication services are integrated in the emerging information sector. Finally, the very notion of telecommunication as an "infrastructure" is put in question for the first time in Eastern Europe. We start to address the two relevant policy issues: modes of regulation, and science and technology policies to accompany the restructuring process.

Pages: 29 p.
Date: 1996
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