Telecommunications Policy for Regional Development~
Empirical Evidence in Europe
Roberta Capello and Peter Nijkamp
The telecommunications industry has been widely studied in American
literature since the debate on the most appropriate market structure found
appropriate ground for development. After the development of new
technological potentials in both transmission and the switching equipment,
which allowed enormous amounts of data (images, text and voice) to be
transmitted on the same infrastructure, the US telecommunications market
has moved from a monopolistic to a competitive profile. The choice to
introduce competitive rules also has been made by the Japanese industry and,
to much lesser extent, by one European nation, Britain.
While the best market solution for the telecommunications industry is
still a matter of scientific dispute, 2 some agreement exists in Europe on the
importance of telecommunications technologies for regional development.
In Europe, the debate of the last two decades has put much attention on
the role of telecommunications in economic development. In particular,
a consensus has developed around the idea that telecommunications
technologies are 'competitive weapons' upon which the competitiveness
of firms and comparative advantage of regions will increasingly depend;
industrial, regional and national economic systems which do not promptly
adopt these technologies risk losing their positions in international markets. 3
Acceptance of the strategic role played by advanced technologies in
economic development during the 1980s is witnessed by the European
Community's launch of a series of extensive programs in research and
technology development intended to decrease regional disparities within
the Community. Initiatives included:
9 RACE (Research and Technology Development in Advanced
Communications in Europe), which operated in two phases from 1987 to
The follow-up program, from
is ACTS (Advanced
Communications Technologies and Services).
9 ESPRIT (European Strategic Program for Research and Development in
Information Technologies). This program is funded until
9 BRITE (Basic Research in Industrial Technologies), now merged with
EURAM (European Research in Advanced Materials) and funded until
9 STAR (This acronym translates to mean advanced telecommunications
services for Europe's regions). The program concluded in
9 DRIVE (Dedicated Road Infrastructure for Vehicle Safety in Europe). This
program was replaced in
with the Transport Telematics program, also
funded until
Some of these programs were specifically developed to encourage
economic development, with the implementation of telecommunications
technologies in less favoured regions of the Community (called Objective 1
regions), such as the STAR program.
The importance of these technologies for economic development has
stimulated analyses and studies on mechanisms for their adoption and
diffusion. The relatively new branch of economics known as industrial
economics has generated many interesting studies, emphasising the nature of
telecommunications technologies and their intrinsic characteristic to be inter-
related. Many of these studies have focused on diffusion mechanisms based
on inter-related consumer preferences. In this context, the concept of network
externalities has been identified, with the aim of explaining the economic
rules governing the diffusion mechanisms of these strategic technologies. 4
Up to now, these two economic theories~telecommunications as the
motor for economic growth on the one hand and network externality theory
on the other~seem to have been completely separated in the literature. The
first theory mainly has been studied in the framework of regional economic
theory: relatively more emphasis is put on the innovation aspect and on
the consequences of the economic growth rate of firms and regions, and on
the territorial transformation which occurs in economic activities when
telecommunications technologies are introduced. By stimulating a shrinking
of the distance between economic actors, telecommunications technologies
may drive the economy towards a completely different spatial structure.

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