Intelligent Environments

TELECOMMUNICATIONS POLICY FOR REGIONAL DEVELOPMENT

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:

99

R. CAPELLO AND P. NIJKAMP

9 RACE (Research and Technology Development in Advanced

Communications in Europe), which operated in two phases from 1987 to

1995.

The follow-up program, from

1995

until

1998,

is ACTS (Advanced

Communications Technologies and Services).

9 ESPRIT (European Strategic Program for Research and Development in

Information Technologies). This program is funded until

1998.

9 BRITE (Basic Research in Industrial Technologies), now merged with

EURAM (European Research in Advanced Materials) and funded until

1998.

9 STAR (This acronym translates to mean advanced telecommunications

services for Europe's regions). The program concluded in

1991.

9 DRIVE (Dedicated Road Infrastructure for Vehicle Safety in Europe). This

program was replaced in

1994

with the Transport Telematics program, also

funded until

1998.

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.

100