1. 2.Global trends and underlying forces determining the progress on the world IC sector 2.1. Reforms of IC sector - evolution of legislation and regulations 2.2. Motive technological forces shaping evolution processes in ICT - Microprocessors - Photonics 2.3. Megatrends in ICT - Digitalization - Mobile communications - Grows of Internet - Convergence of services/networks/devices 2.4. Crisis in IC sector - Manufacturers - Operators - Manias

2. 2.1. Reforms of IC sector - evolution of legislation and regulations Liberalization Privatization # Liberalization (in general) - weakening or total rejection of state control over all types of economic activities and commercial parameters # Liberalization in telecom sector - the transition from a monopoly market structure to a competitive environment and resulted in tectonic shifts in telecommunications industry # 15 years ago the majority of telecommunications companies in the world were under strong state control. # Second half of 90s – beginning of liberalization in telecom sector of European countries, accompanied by privatization

3. A. Steps of IC sector’s reform Process’ steps Privatization and liberalization Liberalization Implications Government sells all or part of its shares (either private or public IPO) Provision of incentives to investors Combination of both approaches to increase efficiency of incumbent and to introduce competition Allowance of competitors into the market Incumbent remains owned by government but are submitted to competition ICT sector’s reform Incumbents New players Source: McKinsey Market-based reforms on three ways

4. B. Significant impact on access infrastructure Teledensity growth: Change in teledensity* in different countries between 1996 and 2000 Upper-high income developed countries Lower-high income developed countries Emerging countries Developing countries +54 +21 +48 +53 +13 +20 +26 +3 +5 No reform Privatization only Liberalization+ Privatization * Fixed plus mobile lines per 100 population Source: ITU, EMC, WEFA, McKinsey GDP for each GoC

5. B. Significant impact on access infrastructure (Cntd) Developing and power countries – great difference in results Countries that have pursued privatization have had much higher growth rates in teledensity in comparison with countries without reforms Countries that have pursued full reform – privatization plus liberalization have much more increases Most of this growth was concentrated in mobile access

6. C. Reform’s impact on the Internet penetration Access availability Prices Competition Enabled lines Choice of services Interconnection conditions Internet user intensity Developed Lower income developed Emerging Developing 54 27 13 39 16 8 39 17 1 64 12 1 +63 +38 +31 +41 Lowest in group Group median Highest in group Source: ITU, EMC, NielsenNet Ratings, World Economic Forum, McKinsey Early beginning of the liberalization

7. D. Reform’s levers: Access availability Degree of price competition Choice of services Interconnection regime for Internet and data services Percent of fixed and mobile access lines enabled for Internet use

8. E. Interact with other ICT market’s dimensions PC/ITV penetration, tariff policy Examples: # US – selection of fees’ options for local calls - no data interconnection fees # In most countries dial-up Internet is metered and surfers pay per minute Flat rate Internet users have been more likely to adopt broadband technologies The importance of these details will keep ICT sector’ reform in a central role in the future

9. F. Some critical issues of IC sector’s reform Government aggressively tries to use a reform to get huge revenue – shares’ and licenses’ overcharges Example: 3G Licenses In Germany were sold 6 licenses for a total of 50 billion Euro (2001) The total worldwide market volume for mobile networks of 50 to 55 billion Euro in 2002 and 2003. The license fee in Germany - 558 Euro/inhabitant (Auctions) At Norway only 10 Euro per/inhabitant (Contest) Such a low investment on the other hand will make an operator profitable in a short time.

10. *Estimated Source: BITKOM; Basis: UMTS Forum UMTS license costs per 2x5 MHz band (in million Euro)

11. 3G Licenses: average cost/inhabitants

12. G. Reform of IC sector: demands for regulation authorities Promote access - fixed and wireless - not hinder it Promote broadband technologies - fixed or wireless Create the guidelines for a stable environment for technological developments Invest through governmental institutions in modern technologies (e.g. e-government ) Propel reliable tax conditions Negotiate at least comparable conditions between the countries Self-regulation of the market price (regulated by market, not by governmental institutions

13. H. Motive forces of reform in IC sector 1. Technological progress – growing productivity of microprocessors progress in fiber optic communications systems highly effective methods of compression and transportation of information Networks with unlimited resources Variety of services Decrease of communications services costs

14. H. Motive forces of reform in IC sector (Cntd) 2. Globalization – different forms of activities, which were previously carried out at local or regional levels are presently being carried out in a continental and world scale Old concept of globalization – physical exports of goods The new dimension in globalization today – entertainment, media and world financial markets on a global scale The key technology in today’s world of global media and finance is ICT technology with the need for global standards and access to technology. Globe becomes "global village" (Marshall McLuhan) New tendency - Glocalization

15. 3. Digital divide Access to telephone, radio, TV, Internet, satellite Digital divide = Telecom divide (2000) H. Motive forces of reform in IC sector (Cntd)

16. Digital divide, 2003

17. Digital divide, 2003 (Cntd)

19. Indicators describing a level of penetration of different IC services