Definition: Digital divide – how access to communication technology such as wireless and cell phones creates a divide between those who live in areas with good and fast coverage compared to those who don’t.

Annotated bibliography:

BBC. (December 14, 2009). 4G mobile phone network comes to Scandinavia. British Broadcasting Company. Retrieved on March 5, 2010, from http://news.bbc.co.uk/2/hi/technology/8412035.stm

Annotation: This article notes that Norway was the first in the world to launch a 4G mobile network. This network is based on a new technology, LTE, which is again another indication that Norway is a global leader in mobile communication.

Brooks, J. (1976). Telephone. The First One Hundred Years. Harper & Row, Publishers. New York, New York.

Annotation: Brooks explores the first century of the telephone and the development of the American telephone business, starting with the heritage of communication technology that lead to the invention of the telephone in 1876 until the book was published in 1976. The author goes after the task chronologically, starting with the concept of talk and communication in a society, and the context in which the invention was created. Brooks explains the significance of the telephone in relation to several areas of study, even if from a fairly one-sided perspective: that of AT&T.  However, it is also clear from Brook’s chronicle that AT&T pretty much IS the history of the telephone in the United States through the first century of the contraption that to such an incredible degree has defined the western society.

Christensen, C., Anthony, S., Roth, E. (2004). Seeing What’s Next. Using the Theories of Innovation to Predict Industry Change. Harvard Business School Publishing. Boston, Massachusetts.

Annotation: This book explains theories behind why some businesses succeed and others fail, using case studies from five major industries, including telecommunications. Christensen outlines the analysis needed to identify industry-changing innovations, the tools to predict winners and losers in competitive battles, and how to evaluate whether a firm’s choices will increase or decrease its chances of succeeding. Specifically the parts about government regulation and its effects on businesses are of interest in the context of the term paper, chapter 4. Christensen also tries to predict the future of telecommunications, chapter 10, specifically wireless technologies and data packets.  

Cohen, J. (1992). The Politics of Telecommunications Regulation. The State and the Divestiture of AT&T. M.E. Sharpe, Inc., Armonk, New York. 

Annotation: This book describes how the mission of government regulation, to provide universal service to everyone, lead to divestiture AT&T in 1984. The author takes a chronologic look at the policies, dividing the period from the invention of the telephone up until 1985 into several blocks: Government and early themes; from FFC was established in 1934 to divestiture in 1984; telephone regulatory policy in the United States 1977-85. He also talks about democracy and policy making, effects on elections and bureaucracy. This book will provide additional insight to how telecommunication regulations were designed in the United States, with what purpose and consequences.  

Enger, H.J. (2010). Personal interview (in Norway) on March 4, 2010.

Annotation: Enger works at Post- og Teletilsynet, the Norwegian equivalent of the Federal Communication Commission. He explained some of the considerations behind the regulations of the mobile industry in Norway, and how they work in practice, and what they have done in terms of providing coverage and service in rural areas. He also talked about how Norwegian authorities are likely to continue their quite extensive regulation, in order to ensure continued high-speed coverage in rural as well as urban areas. Enger also talked about the lack of regulation in the United States, and explained that with the extensive deregulation of the 1980s and 1990s.

Espeli, H. (2005). Norsk telekommunikasjonshistorie, bind 2. Det statsdominerte teleregimet (1920-1970). Gyldendal Norsk Forlag AS. Oslo, Norway.  

Annotation: This book, which is part 2 of a three-part series, details the politics, social and financial implications of regulation in Norwegian telecommunication over the past 150 years. This section explains the peak of Norwegian telecommunications development and adoption and the decline of the service from the mid 1920s until 1970, due to wars, general national debt and inability to handle the demand for telecommunication services. Espeli is a senior researcher at the Norwegian School of Management (BI), Department of Innovation and Organization. He specializes in telecommunications history, among other things.

Espeli, H. (2010). Personal interview (in Norway) on March 3, 2010.

Annotation: Espeli, who is a professor and researcher at the Norwegian School of Management BI, Department of Innovation and Economic Organization, talked about the role of philosophy in determining regulation policies. In Norway, the philosophy is that universal coverage and equal access to mobile services is a goal regardless of where people live. In the United States, regulation is to a large extent left up to  the free market.  

Federal Communication Commission. (2010). Retrieved on Feb 14, 2010, from http://www.fcc.gov. 

Annotation: This site is the umbrella site for the Federal Communication Commission, where all the strategies, goals and objectives regarding competition in telecommunication services are detailed. The site is also a gateway to other parts of the FCC site, such as the spectrum division, as well as the pages detailing the specific requirements for licensees in terms of providing service. On competition: http://www.fcc.gov/competition. On use of spectrum: http://www.fcc.gov/spectrum. On cellular services: http://wireless.fcc.gov/services/index.htm?job=service_home&id=cellular

Heggelund, T. (2009, March 31). DISSE FYLKENE HAR DÅRLIGST MOBILDEKNING. Mobizmag. Retrieved from http://www.mobizmag.no/2009/03/31/disse-fylkene-har-darligst-mobildekning/.

Annotation: This article in the Norwegian online mobile trade magazine for mobile businesses explains what areas have the best and the spottiest high-speed mobile coverage in Norway. Heggelund also notes that overall, 99.8 percent of the Norwegian population has access to mobile coverage. This article estimates that 10,000 people in Norway live in areas where there is no mobile coverage. With a total population of more than 4.5 million, this is comparatively less than in the United States. This article will illustrate the effort of the Norwegian domestic carriers to provide universal coverage, which is to a large extent a result of regulation.

McIvor, K. Interview at Starbucks in the U-Village, Seattle, on February 9, 2010.

Annotation: Kelly McIvor, an instructor with the MCDM program at University of Washington teaching mobile technology classes, offers a well of insight to what the lack of FCC regulations in the mobile and wireless industry has resulted in. McIvor has also worked in the industry in a variety of areas, including the provider side and is currently consulting with T-Mobile.

Post- og Teletilsynet.(2009, August 20). VEILEDNING FOR TILBYDERE AV TELEFONI, BREDBÅND, OSV. Retrieved on January 25, 2010, from www.npt.no.

Annotation: Norwegian authority on telecommunications regulation, use of frequencies, rights and responsibilities of telecommunications providers in Norway. The regulatory reports on the government web site detail and explain the requirements and responsibilities of the telecommunications providers in Norway.

Rinde, H. (2005). Norsk telekommunikasjonshistorie, bind 1. Et Telesystem Tar Form (1855-1920). Gyldendal Norsk Forlag AS. Oslo, Norway.

Annotation: This is the first part of the three-part series detailing Norwegian telecommunications regulation and development from 1853 until 2005. The author looks at the early years, from the telegraph is established in 1853, to government monopoly in 1880 and how the independent telephone companies were swallowed up into the government-run institution that maintained monopoly well into the 1990s. This section of the three-part series handles the period up until 1920. Rinde is a doctorate researcher at the Norwegian School of Management (BI), Department of Innovation and Organization.

Rogers, E. (1962). Diffusion of Innovations. The Free Press. New York, New York.

Annotation: Rogers details how barriers to adoption can make it hard for even brilliant innovations to become main stream. He identifies some general barriers and explains how these different obstacles can influence whether an innovation will be accepted and become a mainstream device. Rogers points out that the culture in which this innovation is being introduced also influences its success rate.

Shirky, C. (2008). Here Comes Everybody. Penguin Books. New York, New York.

Annotation: Shirky explains the societal effects of mainstream majority adoption of technology. Shirky starts by talking about how cell phones and social networks helped retrieve a stolen cell phone. But really, the book is about how technology changes the way we live and the way we organize. In this respect, it is easy to draw the conclusion that those who are unable to take part in the changes because they lack the infrastructure, will be left behind – the digital divide at work. More and more, we don’t only embrace the opportunities these technologies represent, we expect that everyone has access to them because they become so crucial to the way we live and conduct our lives.  This is directly explaining the digital divide, which I suspect is a result of poor high-speed coverage in less lucrative markets.

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Retrieved on March 5, 2010, from http://www.econlib.org/library/Smith/smWN0.html#Preface. Editor/translator: Cannan, E.

Annotation: Adam Smith is the economist of laissez-faire regulation. His idea is that minimal involvement in terms of regulation, taxes and restrictions will produce the most flourishing economies, and that the market will develop the best practices and systems. A guiding principle in American business and corporate culture.

Telenor. (2009). Norsk Historie. Retrieved on February 8, 2010, from Telenor’s web site http://www.telenor.com/no/om-oss/var-historie/norsk-historie.

Annotation: Norwegian telecommunications history to a large extent equals the history of the formerly government-run telecommunications company Telenor. This is their in-house history document, an extensive rundown of the last 160 years of telecommunications in Norway. Step by step and with social commentary, this history document details the evolution of telecommunications in Norway, as well as significant legislation, policies and innovation. This web site is very useful in gaining insight to the evolution of telephony in Norway, from the meager beginnings in 1853 to an industry leader in communications technology.

Thue, L. (2010). Personal interview (in Norway) on March 4, 2010.

Annotation: Personal interview with Thue on the background, purpose and intentions of regulations on mobile communications in Norway, how these have worked and what might change in the future. Thue also explained some of the major differences between the industries in Norway and the United States, based on differences in political ideologies, cultural differences and geographical challenges. Thue is a professor at the Norwegian School of Management BI, Department of Innovation and Economic Organization, as well as a historian who has written the book Norsk Telekommunikasjonshistorie 1970-2005 (Norwegian telecommunications history) and also has studies the development of power and energy technology in Norway and internationally.

Winston, B. (1998). Media Technology and Society. Routledge. New York, New York.

Annotation: Winston details the history of telecommunication and media technology and how new industries develop around these innovations. Winston looks into how new media are born, how they change and explains the social impact of technological change. Particularly chapter 13 provides good insight to the historical perspectives of my project: Winston compares the telephone service and adoption rate in Europe, where the service is largely government run and heavily regulated, to that in the United States where AT&T is enjoying a legal, pseudo-regulated monopoly. He also talks about the different regulation policies that were put in place to correct this in the telephone industry, and how they worked, as well as how the regulations have tried to keep up with new technologies, including cable and wireless.

Definition: Digital divide – how access to communication technology such as wireless and cell phones creates a divide between those who live in areas with good and fast coverage compared to those who don’t. Mobile networks offering 3G speed or better is considered high-speed.

Overview

This part of paper will take a look at the current mobile environment and future predictions of regulations. I will look at the current regulations in the United States and in Norway and compare how they differ, and also how the use of technology differs in these two markets. I also want to look ahead and see how continuing the current practices would influence the development of mobile technology, and whether there might be change on the horizon. 

Additionally, my research has revealed that there is a fundamental difference in the approach to telecommunication services in the United States and Norway. While the Norwegian regulations are founded on the premise of equality and universal service as a good to the society, the American regulatory approach is that the free market will regulate the supply and demand in the best interest of the consumers. However, examining the geographic coverage in the United States compared to Norway, the American approach appears to have failed to produce universal coverage and equal access. Although the largest US wireless providers such as AT&T and Verizon claim that they cover 75 percent of the population, it does not mean that they have service in 75 percent of the United States. There are no requirements from the FCC that they geographically service the area in which they apply for frequencies, just that they offer service to at least 2/3rds of the population within five years of obtaining the license (FCC, 2010). That allows the service providers to only develop the networks and infrastructure in the areas with dense populations. Also, the nation’s two largest networks, Verizon ad AT&T, operate on different technologies, and the result is that they have to build each their own infrastructure. Sprint and Verizon uses the CDMA platform, while AT&T and T-Mobile are based on the global standard GSM. Nextel, a part of Sprint, uses a third technology, the iDEN (McIvor, 2010).

The spotty coverage and clutter of technologies and providers resulted in the American consumers being slow to adopt cellular technology and accordingly the providers being slow to construct the infrastructure and service, given the limited service available. Currently, North America is trailing behind Europe and Asia in technology, coverage, access and available services (McIvor 2010). The lack of regulation has increased the digital divide in the United States, as many of the cutting-edge services are only available in urban areas.

For example, smartphones with the capacity of small computers are taking off all over the world, but in the United States, where you live determines if you have access to a network with high speed coverage (or coverage at all, which is the case for large parts of the rural west and Alaska). This creates a digital divide based on access, and I argue that government regulation requiring providers to build high-speed infrastructure in areas that are not financially lucrative or offering incentives to those that do, would reduce that digital divide. In my opinion, these kinds of government regulations further the economy to the benefit of the common good and prosperity of the country as a whole. Accordingly, regulation and incentives encourage innovation of new technology and services rather than decrease motivation and progress as Clay Christensen suggests (2004).

Contrast: free market versus regulation

A handful of major carriers control the market in the United States. Up until recently, there was no guarantee that a customer of one carrier could talk to or send text messages to customers of other providers. Multimedia messages are still not automatically transmitted between carriers and networks.  This is yet another example of how the lack of regulation in the United States hinders the technology from really taking off.

In Norway on the other hand, the government defined universal coverage and equal access a political goal early on. The regulatory framework determined by the government has been instrumental in facilitating and establishing a universally accessible mobile network with broad coverage. The regulations require providers not only to service a certain percentage of the population in the area, but also to construct infrastructure that geographically cover a certain percentage of the area that the contract defines.

Additionally, Norway has always been on the cutting edge of mobile technology, and done so in part by way of regulation (Thue, 2010; Espeli, 2010). As early as 1981, the Nordic countries (Norway, Sweden, Finland, Denmark and Iceland) established a reliable mobile network operating on the 450MHz frequency, the NMT450. This network quickly caught on among hunters, natural resource management personnel and others who had a need for communication technology beyond radio and were unable to use traditional landlines.

“The fact that it was an international, reliable, well-functioning service is a major contributor to that so many adopted the technology. And many adopted the service because it was one standardized technology,” says Lars Thue, professor at the Norwegian School of Management BI, Department of Innovation and Economic Organization (Thue, L., interview March 4, 2010). He is a historian who has written the book Norsk Telekommunikasjonshistorie 1970-2005 (Norwegian telecommunications history) and also has studies the development of power and energy technology in Norway and internationally. Thue sees a number of similarities between the two fields, and adds that also within energy and power infrastructure, the US approach with private providers has failed to provide the most efficient and universally fair solutions. “Without regulation of the market, you generally see slower adaptation of the technology,” Thue says of the situation in the American mobile industry as well as the US power industry.

Norway: Two levels of requirements

Currently, Norway has two networks that offer national coverage based on the GSM platform, Telenor and Netcom. There is a third operator, Mobile Norway (consisting of two providers: Tele2 and Network Norway), that will start constructing a third network with national coverage.

Norwegian regulations require that network providers cover both 1.) a percentage of the area geographically and 2.) a percentage of the population in that area with service at a speed defined in their contract. Additionally, there is a large number of providers who offer regional or national plans based on roaming. These providers lease network infrastructure from the national networks, that are required to let them use their infrastructure to a price agreed on in their contracts with the government regulators.

“In the United States, there are strong market forces that influence the FCC in their policies,” says Hans Jørgen Enger, senior adviser with the Norwegian government regulatory branch Post- og Teletilsynet (Post and Telecommunications Authorities, the Norwegian equivalent of the FCC) (Enger, H.J., interview March 4, 2010). “The Americans traditionally think business and profit over public utility, and rely on the free market’s self-regulation processes in this area. That allows the US wireless providers to construct network infrastructure where the population is dense and they have opportunities to collect a lot of business and customers for a fairly small infrastructure investment,” Enger explains. “In Norway, we have determined that access and universal service is a political goal, and stepped in to regulate the providers both in terms of what they have to offer and the prices they can charge from the consumers and from each other in order to create incentives for the providers to offer the largest, most extensive service,” Enger continues. He adds that in Norway and Europe in general, it is politically understood that a geographically extensive coverage benefits the society at large. “When the technology is widely available geographically, you get better penetration in the population, which in Europe is defined as crucial for being competitive in both technological advancement, research, development and education overall,” Enger explains.

Enger notes that having three national networks would be ideal in terms of healthy competition in the market. When there are more players among the network providers, the network providers will strive to offer more than the regulations require, in order to be the most attractive network operator to the service providers that lease network capacity. “At the Post and Telecommunications Authorities, we rarely have consumers complain about the coverage available in Norway. I am certain that we would not have the same geographic coverage if there were no regulations of the network providers. This is a good indicator that the regulations work as intended,” Enger concludes.

Thue agrees with Enger in that regulation is required in order to secure the best coverage and fair pricing. He does not imagine that the Norwegian government will deregulate the market. “As long as the providers deliver according to the contracts, the regulators will stay away from their business. Once they detect a problem with the service, the regulators will go after the providers to make sure they act in the best interest of the consumers in terms of delivering universal service and equal access. There is a dynamic interaction between operators and regulators,” Thue explains.

“Nothing in the current political climate indicates that the regulators will become any less demanding of the operators in the foreseeable future,” Thue concludes, citing the deeply rooted Scandinavian culture of equality and fair treatment of all consumers as the fundamental value the regulations are based on.

United States: The market will self-regulate the industry

In the United States, the Federal Communication Commission (FCC) is in charge of the spectrum. The FCC’s job is to assign frequencies to interested buyers, and does so through frequency auctions.

According to the FCC web site on communication strategy and regulation, the free market will solve any issues and result in the best-priced solutions. The guiding principle from the FCC strategic plan 2009-2014 is outlined as:

Competition in the provision of communications services, both domestically and overseas, supports the Nation’s economy. The competitive framework for communications services should foster innovation and offer consumers reliable, meaningful choice in affordable services. (http://www.fcc.gov/competition)

The main objectives of the FCC in this period are defined as follows:

·         Foster sustainable competition across the entire telecommunications sector.

·         Facilitate a more effective wholesale market through interconnection policy and other competition-related rules.

·         Promote and advance universal service.

·         Ensure that consumers have choices among communication services and are protected from anti-competitive behavior in the increasingly competitive telecommunications landscape.

·         Continually evaluate and report on the competitive environment for communications services.

According to the FCC, the intention of the Telecommunications Act of 1996 was to let anyone enter any communication business, and to let any communication business compete in any market against any other. The Act directed the FCC to remove statutory, regulatory, economic and operational barriers to telecommunication (FCC, 2010).

Principle of equality and universal service

Norway’s political promise to secure universal service and reasonable rates regardless of residence, as well as government requirements to providers, have carried over into the mobile and wireless industry, and helped position Norway as a pioneer in technology and global industry leader in delivery of services. I argue that the lack of such requirements have contributed to hinder the diffusion and adoption of these technologies in the United States. Analyzing the history of American regulation and evolution of telephone technology, it seems evident that similar practices during the critical first century of the telephone helped position the United States as the world leader in telephone service, rate structure and delivery. It seems obvious that the lack of such regulation and a complete reliance on the free market to take care of services, products and delivery is part of the reason why the United States is significantly behind the cutting edge in mobile and wireless technology and services (McIvor, 2010).

While AT&T enjoyed a position of legalized monopoly in the United States during the first century of the telephone industry, the telecommunications field was deregulated in the 1980s. AT&T’s regulated monopoly ended, and the Telecommunications Act of 1996 was put in place to do away with most of the remaining regulations. The free market was regarded as the best regulator. This deregulation has contributed to the situation in the current mobile and wireless industry in the United States. The American mobile and wireless business environment is characterized by minimal regulation of the cellular providers, based on the idea that the free market will determine which standards and practices should survive in the mobile and wireless communications market place. So far, the result for the customer has been poorer coverage, problems with interconnectivity and incompatible networks (McIvor, 2010). Norwegian government regulations require mobile providers to build infrastructure in rural areas (where profit on investment is in the red), as well as in the densely populated areas where it makes good business sense to provide cutting edge technology. As the government states on its web page:

One of the objectives for the telecommunications policy is to ensure that the entire country has access to high-quality, reliable and reasonably priced telecommunication. The government wants the mobile coverage to improve where people live and travel, and therefore the government aspires to support development and improvement of infrastructure where the coverage currently is spotty. 

In Norway, high-speed mobile coverage, such as 3G or better, reaches 99.8 percent of the Norwegian population (Heggelund, 2009), which is largely rural outside of the capital and surrounding areas. Norway is among the world leaders in geographic coverage and universal high-quality service, says Lars Thue.  Roughly 25 percent of Norway’s total population lives within commuting distance from the capital Oslo. In order to comply with the government regulations, providers must document that they have covered the amount of area their contracts state, that the coverage is available to at least 90 percent of the population in that area (in the case of Telenor’s contract to offer UMTS mobile coverage, a contract that expires on December 1, 2012), and that the download speed offered is at least 384 kbits/sec in the most densely populated areas. These are just some of the requirements, intended to give an overview of the nature and extent of the government requirements in Norway. In the period from 2000 to 2009, the government negotiated contracts with four providers, but at the end of 2009, only two of them were still operating. Additionally, a third provider offering experimental HiG3 coverage was given an extension to start operating, requiring the company to be in business by 2012 or have their frequencies revoked. (Samferdselsdepartementet,2010). Also, Norway was the first in the world to launch a 4G network, which happened on December 14, 2009. This network, based on Long Term evolution (LTE) technology, has potential download speed that are up to ten times faster than the 3G networks (BBC news, 2009).

In the United States, 4G networks and ultra-high speed wireless networks are currently being introduced in specific test markets. Interestingly, it’s not only the traditional wireless carriers that are testing these technologies. High tech giant and search engine provider Google, Inc., is one of the new players in the market. However, I notice that all the test markets are urban areas, and I fear that unless the government comes in and places geographic coverage requirements, the new high speed technologies will also be limited to urban populations where the profits on infrastructure investment are higher.

Conclusion

            Government regulation versus the free market represents two entirely different systems of organizing the wireless industry. In the United States, the free market is the fundamental framework for the industry, only governed by the FCC in terms of frequency allocation in order to ensure the most efficient use of the spectrum. The two countries have developed their regulatory approach based on two different cultures. In Norway, the principle of universal coverage and equal access has been the underlying value in developing the policies. In the United States, the trust in the free market as the best regulator has been the guiding principle.

“It is not the volume and number of regulations that is the central issue, but the ambitions of the regulations. The Norwegian cultural heritage and traditions value equality and fairness regardless of geographic or financial situation. Politically, there is no reason to treat the telecommunications sector any different than other utilities. The US does not have the same cultural heritage or tradition for favoring equality, says Harald Espeli, professor at the Norwegian School of Management BI, Department of Innovation and Economic Organization (Espeli, H. interview March 3, 2010). “When the free market is the main regulatory force the way it is in the United States, it generates an entirely different approach to government regulations. Corporate profit becomes the determining factor for construction of infrastructure and coverage,” Espeli says.

The principle of equality and universal access is one of the most fundamental values in Scandinavian culture and reflected in national politics – including telecommunications regulations. Accordingly, regulation of the mobile wireless environment has been a factor from the start in order to secure universal coverage and equal access regardless of location. This is also true for the other Nordic countries, and accordingly, these countries were able to collaborate on constructing a wide-reaching, universal mobile network as early as 1981. A sophisticated, well-functioning system facilitated early adoption and penetration, and Scandinavia has been a hotbed for mobile technology and geographic coverage from the start. This is consistent with Roger’s diffusion theory, which states that habits, social norms and existing options that currently get the task done, are some of the barriers to adoption of new inventions (Rogers, 1962). In the United States, the wired telephone system was early on adopted and continued to get things done. Additionally, when relatively few were interested in adopting mobile technology, innovation, infrastructure and service lagged behind for instance Norway, where the regular land lines were more expensive and the new technology seemed like a better option than expanding the old.

I would argue that government regulation of independent, competitive players in the industry creates an environment of early adaptation, technology innovation and advanced service that benefits the society as a whole and reduces the digital divide.

Furthermore, establishing universal coverage and equal access contributes to improve efficiency and increase profitability for agencies and businesses. When the majority of the population has access to fast wireless connections, businesses and institutions can assume universal coverage and access, they can streamline their communication channels and create efficient avenues that reach all of their customers, clients and connections. On the other hand, when advanced telecommunications services are only available in some areas and to some segments of the population, it increases the digital divide.

Agencies and corporations have to maintain a variety of communication channels to serve their customers, clients and connections. This is both time consuming, inefficient, and expensive because it costs to establish, maintain and service a large number of communication channels. These resources could have been invested differently if universal access was available. Additionally, poor penetration and adoption of technologies hamper innovation and increase the digital divide. I argue that this is what we have seen in the US wireless environment, given that there is no incentive for providers to offer service where profitability is lower.

Limitations and further research

I recognize that this research paper only looked at a small country and compared it to the United States as a whole. Norway is only the size of California in area, but with a population of only 4.6 million, vast areas of wilderness and uninhabited space as well as climatic conditions that vary from temperate to arctic, the challenges in establishing, constructing and maintaining sophisticated wireless services and infrastructure are similar to those that exist in the United States. Also, the purpose of this paper was to look at the consequences of two different approaches to regulation. It would also be interesting to look more closely at the digital divide to find out what kinds of technologies and services contribute the most to decrease the digital divide. Finally, it would be interesting to look at the cultural, social and economic effects of the digital divide.

References:

BBC. (December 14, 2009). 4G mobile phone network comes to Scandinavia. British Broadcasting Company. Retrieved on March 5, 2010, from http://news.bbc.co.uk/2/hi/technology/8412035.stm

Brooks, J. (1976). Telephone. The First One Hundred Years. Harper & Row, Publishers. New York, New York.

Christensen, C., Anthony, S., Roth, E. (2004). Seeing What’s Next. Using the Theories of Innovation to Predict Industry Change. Harvard Business School Publishing. Boston, Massachusetts.

Cohen, J. (1992). The Politics of Telecommunications Regulation. The State and the Divestiture of AT&T. M.E. Sharpe, Inc., Armonk, New York. 

Enger, H.J. (2010). Personal interview on March 4, 2010.

Espeli, H. (2005). Norsk telekommunikasjonshistorie, bind 2. Det statsdominerte teleregimet (1920-1970). Gyldendal Norsk Forlag AS. Oslo, Norway. 

Espeli, H. (2010). Personal interview on March 3, 2010.

Federal Communication Commission. (2010). Retrieved on Feb 14, 2010, from http://www.fcc.gov. 

Heggelund, T. (2009, March 31). DISSE FYLKENE HAR DÅRLIGST MOBILDEKNING. Mobizmag. Retrieved from http://www.mobizmag.no/2009/03/31/disse-fylkene-har-darligst-mobildekning/.

Post- og Teletilsynet.(2009, August 20). VEILEDNING FOR TILBYDERE AV TELEFONI, BREDBÅND, OSV. Retrieved on January 25, 2010, from www.npt.no.

Rogers, E. (1962). Diffusion of Innovations. The Free Press. New York, New York.

Samferdselsdepartementet. (2010). Retrieved on February 8, 2010, from http://www.regjeringen.no/nb/dep/sd/tema/telekommunikasjon/mobilutbygging-i-norge.html?id=439291

Samferdselsdepartementet. (2010). Retrieved on March 4, 2010, from http://www.regjeringen.no/upload/SD/Vedlegg/Telekommunikasjon/umts-konsesjon%20telenor.pdf

Samferdselsdepartementet. (2010). Retrieved on March 4, 2010, from http://www.regjeringen.no/upload/SD/Vedlegg/Telekommunikasjon/umts-konsesjon%20netcom.pdf

Shirky, C. (2008). Here Comes Everybody. Penguin Books. New York, New York.

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Retrieved on March 5, 2010, from http://www.econlib.org/library/Smith/smWN0.html#Preface. Editor/translator: Cannan, E.

Telenor. (2009). Norsk Historie. Retrieved on February 8, 2010, from Telenor’s web site http://www.telenor.com/no/om-oss/var-historie/norsk-historie.

Thue, L. (2010). Personal interview in Norway on March 4, 2010.

Winston, B. (1998). Media Technology and Society. Routledge. New York, New York.

Definition: Digital divide – how access to communication technology such as wireless and cell phones creates a divide between those who live in areas with good and fast coverage compared to those who don’t. Fast coverage is defined as 3G or better.

Overview:

This part of paper will take a look at the evolution of telephone infrastructure in the United States and Norway to get an overview of the origins of the regulations – or lack thereof.  Efficient telecommunications with universal coverage and equal access is an important element to the overall economy. Lack thereof can hinder innovation and development, slow down adoption and penetration, increase the digital divide and slow the economy as a whole. I will compare the two countries, both in terms of approach to regulation and a walkthrough of the history. 

Similar origins – very different directions:

While working on this project, I discovered that during the first century of the telephone’s existence, regulations and policies in Norway and the Unites States were similar in many key areas. In the early history of the telephone, both countries telecommunications policies were based on the notion of universal service and equity, and that one company was less wasteful than duplicate services. Hence, both Norway and the United States supported a monopolist provider, but differed in the nature of the monopoly.

A major difference in the telecommunications is the ownership structure. While Norway’s telephone monopoly was government-owned, the American monopolist (AT&T) was a private, for-profit corporation, which to a large extent was able to dictate its regulatory terms with the government regulators.  AT&T was allowed to (and had to) post a profit, which could be then reinvested in infrastructure and extended service.  The Norwegian telephone system was only able to expand when allocated money from the federal budget, where the telecommunication needs were prioritized and balanced with other tax-supported projects such as roads, education and health care. Accordingly, there were times were telecommunications were severely underfunded in Norway, particularly during the rebuilding years after World War II (Espeli, 2005).

Reconsidering regulations:

By the mid 1980s both countries were working on major restructuring of the telecommunications industry and regulations (Cohen, 1992; Telenor, 2009). In Norway, the government-run telecommunications monopoly was slowly privatized, division by division, a project that was not completed until 1998. The result was phenomenally increased investment in mobile and wireless communication, turning Norway into a global industry leader by 2000 (Telenor 2009).

In the United States, the series of law suits that started in the 1970s eventually resulted in the divestiture of AT&T in 1984 (Cohen, 1992). I suspect that the first century of legalized monopoly in the United States contributed to the situation in the current mobile and wireless industry in the United States. The American mobile and wireless business environment is characterized by minimal regulation of the cellular providers, based on the idea that the free market will determine which standards and practices should survive in the mobile and wireless communications market place. So far, the result for the customer has been poorer coverage, problems with interconnectivity and incompatible networks (McIvor, 2010).

Norwegian government regulations require mobile providers to build infrastructure in rural areas (where return on investment is negative), as well as in the densely populated areas where it makes good business sense to provide cutting edge technology. As the government states on its web page: “One of the objectives for the telecommunications policy is to ensure that the entire country has access to high-quality, reliable and reasonably priced telecommunication. The government wants the mobile coverage to improve where people live and travel, and therefore the government aspires to support development and improvement of infrastructure where the coverage currently is spotty.” (Samferdselsdepartementet, 2009 ).

The results is that high-speed mobile coverage has reached 99.8 percent of the Norwegian population (Heggelund, 2009), which is largely rural. Outside of the capital and surrounding areas, Norway has impressive coverage for a small population. The population density is 14 people per square kilometer in Norway, compared to 31 in the United States (including Alaska) (Statistisk Sentralbyrå, 2010). Just as a comparison, Norway is about the size of California in area, and has approximately 4.6 million inhabitants compared with California’s more than 50 million residents. A quarter of Norway’s total population lives within commuting distance from the capital Oslo. In order to comply with the government regulations, providers must document that they have provided service to the amount of area their contracts state, that the coverage is available to at least 90 percent of the population in that area (in the case of Telenor’s contract to offer UMTS mobile coverage, a contract that expires on December 1, 2012), and that the download speed offered is at least 384 kbits/sec in the most densely populated areas. These are just some of the requirements, intended to give an overview of the nature and extent of the government requirements in Norway. In the period from 2000 to 2009, the government negotiated contracts with four providers, but at the end of 2009, only two of them were still operating. Additionally, a third provider offering experimental HiG3 coverage was given an extension to start operating, requiring the company to be in business by 2012 or have their frequencies revoked. (Samferdselsdepartementet, 2009).

Because the high-speed mobile network access in Norway reaches virtually all inhabitants, companies can assume that customers have access to high speed mobile networks and therefore offer mobile banking, mobile account access and other services to their customers. This is convenient for both users and businesses, and the high-speed networks allow for quite advanced operations to be performed via mobile phones, as well as mobile broadband. For instance, Norwegian citizens can file their taxes using mobile phones, pay their federal student loans and access their government files.

Regulation and policy in the United States:

In the United States, traditional telephone telecommunications were highly regulated. As a result, AT&T, which was the early major institution in the field, was able to enjoy a legalized monopoly status. When AT&T eventually was split up due to the Telecommunications Act of 1984, the overall climate in the US was that the industry needed to be less regulated to allow more players in the field and that more competition would produce the best prices and services (Cohen, 1992). There are currently no government requirements for mobile carriers to provide service to a certain percentage of the population in an area, restrictions in terms of minimum network speed or interconnectivity between providers. This is very different than the traditional telecommunications, where the government demanded AT&T had to interconnect calls. The Federal Communications Commission only regulates the airwaves, and distributes frequencies, which is the license to operate in the wireless environment. Therefore, businesses cannot assume that most of their customers have access to a high speed mobile network and can access their accounts and take advantage of mobile services. Hence, development and evolution of mobile features might be slower than the advances in the actual technology internationally, because the US market is more limited than it would have been if coverage had been more universal. However, with traditional telephone landlines, the US government had a number of requirements for providers, including universal service and development of service in rural areas.

Part of the reason for the reluctance to regulation in the mobile industry is rooted in the US attitude toward government involvement in business, where less is generally considered better. According to Kelly McIvor, an instructor at the MCDM at the University of Washington teaching mobile technology courses, the FCC only regulates the frequencies/air waves but could have influenced the coverage and development in the industry.

“The FCC basically is hands off. They say that the free market will eventually take care of the service issues,” says McIvor, noting that the consumers could easily get old before the issues are resolved and everyone have access to the infrastructure. Among current issues that hinder development and innovation in United States are no requirements that domestic providers interconnect calls and data transfer between networks, handsets not being compatible across networks and two national networks that don’t necessarily communicate (GSM and CDMA).

As stated on the FCC homepage: “Competition in the provision of communications services, both domestically and overseas, supports the Nation’s economy. The competitive framework for communications services should foster innovation and offer consumers reliable, meaningful choice in affordable services” (FCC, 2010). Competition and hand-off policies appear to guide every aspect of the FCC’s areas of regulation, from media, to broadband and spectrum.

In the book “Seeing What’s Next,” author Clay Christensen (2008) argues that government regulations generally affect motivation and progress negatively, but I would argue on the basis of the Norwegian mobile industry that this is not always the case. Christensen writes that “the government’s power to affect innovation lies in its policymaking (including subsidies and incentives) and regulatory authority. The government… can affect either the motivation or ability of industry participants. In doing so, they can change an industry’s context, making it more or less conducive to innovation.”

Brian Winston (1998) on the other hand, points out that in 1845 the Postmaster General already was concerned about private businesses owning and controlling critical infrastructure in relation to the telegraph. He argues that the government plays a role in keeping the playing field level and preventing one private institution from dominating and dictating critical infrastructure. Along the same lines, Cohen explains that the US government represented by the FCC felt that maintaining the relationship between AT&T as a regulated monopoly, and adherence to an equity policy regime was necessary to ensure survival of the universal service. And indeed, the universal service policy in the United States helped meet the huge demand for telephone service. By the 1960s, 80 percent of American households had telephones, and by the 1970s that figure topped 90 percent (Cohen, 1992).

In this context, it is interesting to compare Winston’s analysis of regulation of the telephone industry with that of John Brooks, who Winston quotes in chapter 13 of Media Technology and Society (1998). Brooks is the author of “Telephone. The First One Hundred Years.”

In contrast to Brooks, Winston has a more diverse approach to the benefits and drawbacks of government regulation. While Brooks draws the conclusion that the European government-run telephone systems with their low rates and fees simply failed to pull in enough money to build and run a first-class telephone service, Winston argues that there are several reasons for lower telephone penetration in Europe.  Brooks concludes that the free market and private initiative is better suited to provide low-cost, high-quality service than a government-run approach based on statistics showing that the United States had (and still has) a much bigger penetration of telephones than any European country. Winston on the other hand points out that in Sweden, where the government looked at the telephone as a new kind of public utility, the publicly run version was very effective in providing high-quality service. He also points out that the American private business model in many instances resulted in higher rates in some areas and price-bidding in other areas, which can easily be argued as unfair. Furthermore, Winston explains that cultural differences and variation in how rural villages were organized geographically also contributed to lower density of phones per capita in Europe compared to the US. While Brooks appears to think the Europeans simply didn’t get it, I believe their initial reluctance was based at least partially on their cultural heritage. According to Roger’s diffusion theory, habits, social norms and existing options that currently get the task done are some of the barriers to adoption of new inventions. While Americans have proven to be more socially adaptable to new technology, this is a slower process in Europe, Winston explains.

Also, Winston points out that in America’s free-enterprise model, the leading provider, AT&T (which in various ways was able to bargain its way to a regulated, legal monopoly on telephone services that lasted almost a century) was able to refuse to connect their subscribers to those of competing telephone providers. This has a strong parallel in the mobile world in North America: up until recently, a subscriber of one cellular carrier could not count on being able to call mobile phone users on other networks. It is only a couple of years ago that text messages were delivered between networks, and multi-media messages remain a mystery in terms of whether they’ll be delivered to other networks. In Europe, specifically in Scandinavia, there are no such inter-network issues. Most of the nationalized telephone companies have become privatized or semi-privatized, but are still heavily regulated in order to secure fair pricing regardless of where customers live and interconnectivity.

Jeffrey Cohen (1992) looks at the politics of telecommunications regulation in the United States from several different angles when explaining why the FCC eventually moved to deregulate the telephone industry in 1984 .

Cohen analyzes how the telecommunications industry in the United States ended up with the kind of policies we currently experience: a philosophy that the market economy will take care of any problem. In the early stages of American telephone business , the government had to choose between two policy directions. One the one hand, the regulators could opt for economic efficiency and equity, which later shaped the state responses to divestiture. There is a connection between antitrust and economic efficiency, and there is a connection between regulation and equity/universal service. On the other hand, the regulators could have considered laissez faire and nationalization, but these were immediately closed off to public debate and consideration. Hence, the United States’ telephone system was developed under regulations that focused on universal service, which helped meet the huge demand for telephone services. These policies also contributed to make the United States a global industry leader in telephone adoption, pricing and innovation (Cohen, 1992). 

The history of the telephone in Norway:

The Norwegian telecommunications corporation currently known as Telenor has a more than 150-year old track record as the telegraph and telephone service provider in Norway. The first telegraph line was opened between Christiania (the former name for the capital Oslo) and Stroemmen (about a 20-minute drive north of Oslo), following the rail road tracks. “Det norske Telegrafverket” – the public telegraph company, was established in 1855, and the Monopoly Act of 1881 granted the government the sole right to provide telegraphy services in Norway. The Telegraphy Act of 1899 further strengthened the government’s position, stating that only the government could provide telegraph and telecommunications services in Norway.  Depending on the overall economy of the country, Norway has been among the pioneers on the technology and infrastructure side, as well as among the countries trailing behind the general development. Early on, Norway was an industry leader, while in the hard years from 1930 until well into the 1970s, Norway’s penetration and technical system was far behind other western countries (Espeli, 2005).

In 1938, the government published the flyer “Telephones to the people” where it stated its agenda to eliminate all the private small telephone companies into “one united telephone kingdom” using the analogy to the Viking king Harald Haarfagre, who united the tribal Viking communities in Norway to one kingdom in year 1030. At that point, Norway had about 250 small local telephone companies that “couldn’t see the forest for trees in their own areas” and therefore needed to become a part of a national, government-run telephone company. But while Haarfagre spent 10 years collecting Norway to one kingdom, the national telephone company spent almost 50 years on its task. In 1974, the last independent telephone company was included in the state monopoly. But during the rebuilding years after World War II, telecommunications didn’t rank particularly high on the government’s priorities list, and accordingly investments and upgrades in the infrastructure and technology was only granted whenever there was money left over. Norway had gone from being an industry pioneer in the early to mid 1920s to a country with mediocre to sub-par telecommunications by western European standards (Espeli, 2005).

Just like the telephone industry in the United States that was battling huge distances when setting up the infrastructure, Norway had its share of physical and climatic challenges. Sparsely populated and vastly unfriendly terrain including large mountainous areas, steep rock faces diving into long fjords and harsh weather conditions, Norway was far from ideal for establishing a landline network.

Given the challenging nature of the topography, rural population and inclement weather, Norway has always been a pioneer in telecommunications. The Bell telephone was demonstrated in Oslo in 1877, and the first telephone line was opened in 1878. The first connection center was opened in Oslo in 1880. As early as in 1903, the government-run telephone company was experimenting with radio waves to relay telephone conversations. In 1906, the radio wave system was a permanent addition to the landline network. This was the second civilian radio wave telephone network in the world. By 1911, Norway operated a wireless telegraph service between the mainland and the outlying islands of Svalbard, a mining and research community close to the North Pole. In 1920, the town of Skien initiates the first Scandinavian automatic switchboard, and in 1928 the telephone connection between Norway and the United States is established. The first satellite telephone connection between the two countries was established in 1960 (Telenor, 2009).

In 1969, another milestone was reached. Norway – in cooperation with the other Nordic countries – rolled out the standard for the first mobile telephone network, the NMT 450 (Nordisk MobilTelefon System, running on 450mHz frequency), and within a year, mobile services were commercially available with 43 base stations in Norway. Also in 1969, the government-run company changed its name from “Telegrafverket” (the telegraph service) to the “Televerket” (tele-services) to better reflect the scope of services offered, and Televerket completed its ability to send data over the telephone network.

By 1970, 50 percent of Norwegian households have telephones, compared to 80 percent in the United States.  The government-run telephone company was not able to keep up with demand. After World War II, more people wanted telephones than what the company could handle, and as late as in 1979, almost 95,000 Norwegians were still waiting to be connected. Norway was the last country in Europe to offer color television broadcasts, rolling out the service in 1972. The first commercial TV programming aired in 1960. Automating the telephone switchboards was also a long process, which started in the 1930s. But it was not until 1985 that the whole country was connected by electronic switchboards. The very last manual switchboard was in operation until 1993, serving as a real-human connection between the Sami tribes in the northernmost state in Norway. At that point, mobile phones had taken over and made the manual switching obsolete.

However, in the mobile industry, Norway was a technology pioneer from an early point. The first automated mobile phone system, the Nordic Mobile Telephony (NMT), became available in 1981, the same year the telefax was introduced in Norway. Given the topographic challenges and vast distances, mobile telecommunications is a major research and development area, and by 2008, Norway has become the largest provider of mobile services in the world (Telenor, 2009).

Privatization – Changes in policies and regulation in Norway:

During the late 1980s and early 1990s, the political climate in Norway was changing. Several of the state-run services were turned into for-profit businesses. Telenor was no exception. The government monopoly on distributing telephone sets is repealed in 1988. After 11 years of political debacle, Televerket became a stock exchanged corporation in 1994, and in 1995 changes its name to Telenor, which is still the corporation’s name. The company was gradually converted into a for-profit business, but is still the leading provider of a complete line of telecommunication services in Norway. The privatization process was not fully completed until 1998 (Telenor, 2009). Telenor grew both nationally and internationally during the 1990s after adopting a traditional for-profit business model. 

The government opened the telecommunications market for competition in 1992, allowing other companies to offer services, but most have come and gone. Only NetCom still exists as a national provider aside from Telenor.  Much of the physical wiring is largely Telenor’s property outside the most densely populated areas. However, under government regulation and contract conditions, Telenor is required to lease their infrastructure to other providers. But of course, Telenor can charge for use of the lines based on rates negotiated in the contract (Samferdselsdepartementet, 2009).

In 1992, Televerket establishes the first GSM (Global System for Mobile Communications) in Norway, which became the mobile industry standard in most of the world – except in North America where to this date both the CDMA and the GSM systems are fighting for market dominance.  The 1994 Olympics in Lillehammer, Norway, were dubbed the “mobile games.” Telenor provided mobile services to 25,000 cell phones, and the international media devoted considerable press to the fact. This is also the year when Telenor introduces ISDN (Integrated Services Digital Network), which becomes synonymous with Internet connection in Norway. In 1995, Norwegians send the first SMS messages from their mobile phones. In 1996, email is introduced commercially, and by 1997, data traffic constitutes 15 percent of the overall telecommunications traffic in Norway.

Through the first decade of this century, Telenor and Norwegian telecommunications industry focused on mobile technology and dominance. In 2001, Telenor buys Comsat Mobile Communications from Lockheed and becomes the world’s largest provider of satellite-based mobile services. By 2004, Norway and Sweden operate EDGE mobile networks (optimized GSM network) and the UMTS (Universal Mobile Telecommunication Systems) is operative, after being tested since 2002. In 2007, Telenor obtains a license to operate 2.6GHz 4G (fourth generation) mobile networks in Norway, which were put into service in December 2009, as the first in the world.  And, as a side note, the world’s first book developed entirely for distribution on mobile phone devices is released in Norway. The author is Andreas Markusson, the book a crime novel titled “Første Gang Jeg Døde” (The First Time I Died) (Telenor, 2009).

Now what:

Norway’s promise to universal service and reasonable rates regardless of residence as well as government requirements to providers have carried over into the mobile and wireless industry, and helped position Norway as a pioneer in technology and global industry leader in delivery of services. I will argue that the lack of such requirements have contributed to hinder the diffusion and adoption of these technologies in the United States. Analyzing the history of American regulation and evolution of telephone technology, it seems evident that similar practices during the critical first century of the telephone helped position the United States as the world leader in telephone service, rate structure and delivery. It seems obvious that the lack of such regulation and a complete reliance on the free market to take care of services, products and delivery is part of the reason why the United States is significantly behind the cutting edge in mobile and wireless technology and services.