Determinants of Diffusion of the Internet in Developing Countries: A Case of Nepal

1. Determinants of Diffusion of the Internet in Developing Countries: A Case of Nepal

2. “Nepal is one of many historically poor and geographically isolated countries now looking to information technology (IT) to help relieve these problems by providing socially and economically valuable connectivity to other parts of the world. Is some sort of closing of the international digital divide possible, or realistic, for such a country?” S. Goodman, T. Kelly, M. Minges, and L. Press COMMUNICATIONS OF THE ACM November 2000/Vol. 43, No. 11 Preview

3. Introduction Literature review Data Estimation of the diffusion process Determinants of Internet adoption Reference Outline

4. The Internet - “a collection of interconnected networks using IP which allows them to function as a single, large virtual network." (ITU-T Study Group 13) Precursor of IT revolution & key tool of economic development Is not a single innovation but a cluster of related technologies, used by diverse people, in diverse real-world locations (Miller and Slater, 2000) elegant blending of telecommunication and computer technology An interactive technology Different diffusion speed of the Internet for each country, territory and region due to many local socioeconomic factors Steady growth of Internet penetration rate in all parts of the world a measurement of globalization and a proof of the phenomenon Introduction

5. Okinawa G8 Charter 2000 asserted – “Countries that succeed in harnessing IT potential can look forward to leapfrogging conventional obstacles of infrastructural development, to meeting more effectively their vital development goals, such as poverty reduction, health, sanitation, and education, and to benefiting from the rapid growth of global e-commerce.” structural conduciveness and globalization Internet reduces economic transaction costs and minimizes uncertainty concerning the distribution of goods/services in a high mass consumption society Introduction contd..

6. Introduction contd.. Significant disparity in Internet diffusion among countries

7. Raises important policy questions - need to understand the process of diffusion to anticipate if developing countries eventually catch up and eradicate information poverty and, if not, what policies to be adopted to increase the speed of Internet adoption (Andrés et al,, 2007) Introduction contd..

8. Diffusion of innovations “process by which an innovation is communicated through certain channels over time among the members of a social system” Rogers, DoI (2003) Literature Review (theoretical)

9. Most widely researched and best documented social phenomena, e.g. Griliches (1957), Davies (1979), Gort & Klepper (1982), Mansfield (1961), Bass (1969), Mahajan & Peterson (1979).. Generalized Bass model Mostly internal-influence model such as Gompertz’s model applied for diffusion of Internet and the like Wolcott et al. (2001) – GDI framework (qualitative) Literature Review contd..

10. Literature Review (empirical)

11. Introduction of IT and IT related services in Nepal led by private sectors Liberalization of telecommunication market through Telecommunication regulation 1997 Private telcos emerged Number of ISPs increased Internet service price kept decreasing De-licensing ISM Band wireless frequencies (2.4 GHz and 5.8 GHz) Tele-density and internet penetration rate still very low 28.5% telecommunication penetration 16% Internet penetration Internet in Nepal

12. Internet Use in Nepal

13. Main Players of Diffusion Process Government policies, regulations Infrastructure Providers Telecom, network ISPs Provide Internet technology and services Funding Institutions Professional organizations/associations Knowledge and expertise sharing, research, education

14. Estimation of diffusion of the Internet through number of users and/or subscribers Albeit many suggested parameters such as connectivity, host count, number of web sites, language distribution, compound indices of pervasiveness, geographic dispersion, sectoral absorption, connectivity infrastructure, organizational infrastructure, and sophistication of use Main dataset – ITU 2009 Including NTA MIS report Total population regarded as potential user Longitudinal data from 1995 to 2007 Data

15. Determinants of Internet diffusion in Nepal Where, IUt represents the number of Internet users at period t Yt is the real GDP per capita Pt represents the real cost of a local phone call Lt and Ct are the number of phone lines and computers per capita ? is a fixed effect et is a standard error term

16. Global Diffusion of Internet Framework

17. Technology qualities Perceived value (similar to relative advantage) Ease of use Cost of Internet access Interrelationships within the technology cluster Access to constituent technologies Demand for capacity, multiplicity of ISPs External surrounding forces Geography Adequacy and fluidity of resources Culture of entrepreneurship Regulatory legal framework Enablers of change Determinants of Internet Diffusion Wolcott et al. (2001)

18. Wong, P. (2002), ICT production and diffusion in Asia Digital dividends or digital divide? Information Economics and Policy 14, 167–187 Kshetri, N. (2005), What determines Internet diffusion loci in developing countries: Evidence from China and India, Pacific Telecommunications Review 23, 3, 25-34 Indjikiana, R. and Siegel, D.S. (2005), The impact of investment in IT on economic performance: Implications for developing countries, World Development 33, 5, 681-700 Wolcott, P., Press, L., McHenry, W., Goodman, S. and Foster, W. (2001), A framework for assessing the global diffusion of the Internet, Journal of the Association for Information Systems 2, 6 Miller, D. and Slater, D. (2000), “The Internet: An Ethnographic Approach”, New York University Press Gunnawardana, K.D. (2007), Potential challenges of ICT implementations in Sri Lanka, Chapter XIII, in Information and Communication Technologies for Economic and Regional Developments, edited by Hakikur Rahman, Idea Group Inc. Simpson, R., and Hunter, A. (2001), The Internet and regional Australia: How rural communities can address the impact of the Internet, Canberra: Rural Industries Research and Development Corporation Kiiski, S. and Pohjola, M. (2002), Cross country diffusion of the Internet, Information Economics and Policy 14, 2, 297-310 Rogers, E. M. (1995), Diffusion of Innovations. New York: Free Press Dasgupta, S., Lall, S., and D. Wheeler (2001), Policy reform, economic growth, and the digital divide: An econometric analysis, World Bank Working Paper, No. 2567, March References

19. Norris, P. 2001. Digital Divide: Civil Engagement, Information Poverty, and the Internet Worldwide, New York, NY: Cambridge University Press Bazar, B. and Boalch, G. (1997), A preliminary model of internet diffusion within developing countries, paper presented at AusWeb97 Conference, Southern Cross University, Lismore NSW 2480, Australia Andrés, L., Cuberes, D., Diouf, M.A., Serebrisky, T. (2007), Diffusion of the Internet: A cross-country analysis, Policy Research Working Paper 4420, The World Bank, Latin America and the Caribbean Region Sustainable Development Department Kenny, C. (2003), The Internet and economic growth in less-developed countries: A case of managing expectations, Oxford Development Studies, 31, 1, 99-113 Hargittai, E. (1999), Weaving the western web: Explaining differences in Internet connectivity among OECD countries, Telecommunication Policy 23, 701-718 Chong, A., and Micco, A. (2003), The Internet and the ability to innovate in Latin America, Emerging Markets Review 4, 53-72 Press, L. (2000), The state of the Internet: Growth and gaps, available at http://www.isoc.org/inet2000/cdproceedings/8e/8e_4.htm#_ftn4 accessed on May 30, 2010 References contd..