A recent study reported by ITU/InfoDev reveals that investment in telecoms generates growth dividend because the spread of telecommunications reduces costs of interaction, expands market boundaries, and enormously expands information flows.

The study which was funded by Vodafone and the Leverhulme Trust was a collaborative research by some renown researchers from the University of Calgary and University of Toronto in Canada, and FTI Consulting in London. Using data from 92 countries (high income and low income) between 1980 and 2003, the researchers subjected the impact of telecoms roll-out on economic growth in poorer nations to a thorough empirical scrutiny by employing the Annual Production Function (APF) and the Endogenous Technical Change (ETC) approaches.

The results of the study show that in general the advent of mobile telephony has had a positive and significant impact on economic growth in both developed and developing economies. Key among these are:

A) Developed Economies

• In the OECD economies, modern fixed-line networks took a long time to develop
• Access to homes and firms at the time required physical lines to be built which was a slow and expensive process
• These economies by and large had fully articulated fixed-line networks by 1996
• The addition of mobile networks in these economies had significant value-added benefits by complementing the existing fixed lines.

B) Less Developed Economies

• Developing countries may be said to experience a low telecoms trap i.e. the lack of networks and access in many villages increases costs, and reduces opportunities because information is difficult to gather
• But at the same time, the impact of mobile telephony may be twice as large in these countries compared to developed countries
• In these economies, mobile phones may be substituting for fixed lines
• They are playing the same crucial role that fixed telephony played in the richer economies in the 1970s and 1980s
• The growth dividend of increasing mobile phone penetration in developing countries is therefore substantial and far larger because mobile phones provide, by and large, the main communications networks
• Mobile telephony therefore supplants the information-gathering role of fixed-line systems.

The study concluded that telecommunications is an important prerequisite for participation in the modern economic universe. The differences in the penetration and diffusion of mobile telephony appear to explain some of the differences in growth rates between developing countries. But given the speed with which mobile telecoms have spread in developing nations, it is unlikely that large gaps in penetration will persist forever.

Visit here to access the full report.